USA current President Joe Biden announced that he will not seek re-election, and supports Vice President Kamala Harris as the Democratic candidate. This news was released at a critical moment less than four months before the November election, which may exacerbate the instability of Wall Street.

(1) Market observers have various opinions.

Current political uncertainty in the US is increasing. As there is no precedent for predicting the impact of the Democratic candidate, who has not gone through the normal primary process, market observers have various opinions.

View 1: Brings more uncertainty

Zachary Griffiths, director of US investment grade and macro strategy at CreditSights, said: "The primary impact of this statement is likely to be more uncertainty, which typically sends the market into a safe haven mode, with stock markets seeing a sell-off and investors buying high-quality stocks."

Barry Knapp, managing partner at Ironsides Partners, believes that market uncertainty has greatly increased, which may affect futures opening performance. Although Bitcoin has shown some volatility, the market has just experienced a turbulent week, and the main reason behind this is not Trump. The deeper reasons are the weak economic trend and the Fed's hesitant attitude towards cutting interest rates by 50 basis points in September. Obviously, many factors are intertwined, indicating that the future market will face more uncertainty.

Gregory Faranello, Director of US Rate Trading and Strategy at AmeriVet Securities, expects that the bond market may experience more stalemate. The US Treasury market will continue to closely monitor Treasury supply, the dynamics of the central bank's balance sheet, and key economic indicators. Although the market may experience some price volatility, the Fed's rate decisions should reflect what has happened rather than purely based on expectations.

Phoenix Financial Services Chief Market Analyst Wayne Kaufman said that the market may hesitate in uncertainty. He pointed out that although the optimism of artificial intelligence has supported the market to some extent, August and September, which are coming soon, have always been a period of weak market performance in history.

View 2: "Trump Trade" will continue

Supporters of the "Trump Trade" believe that the market has priced in Biden's withdrawal and the public announcement will not have a significant impact.

Art Hogan, Chief Market Strategist at B. Riley Wealth, believes that the most noteworthy phenomenon in the current "Trump trade" is the rise in the prices of Bitcoin and other cryptocurrencies, which indicates that the market considers Trump to have a more positive attitude towards these asset classes. He thinks that the market has gradually absorbed the news of President Biden not seeking reelection and speculates that if Trump is re-elected, there may be similar trading opportunities as small-cap stocks benefited from rate cuts. He expects that the Fed may take interest rate reduction measures in September.

View 3: "Trump Trade" will ebb

Yung-Yu Ma, Chief Investment Officer at BMO Wealth Management, expects Trump's trading to stall temporarily until the identity of the Democratic candidate becomes clearer. He warned that this event has brought more political uncertainty to the market, which may cause short-term volatility.

Rhona O'Connel, Chief Market Analyst at Stonex, said, "My gut reaction to Biden dropping out is that everything is uncertain in the short term, especially the issue of the Democratic nomination. But it is likely to put the brakes on the 'Trump trade.' In terms of hedging, purely from this perspective, the upward trend of gold is stronger than the downward trend."

Matt Maley, Chief Market Strategist at Miller Tabak + Co., said, "'Trump trades,' such as Bitcoin and energy, will start to close out, and some impacted trades, such as solar stocks or electric cars, will rebound. But there is still a lot of uncertainty, and the market doesn't like that. From now until Labor Day, and then until September, we'll see a sharp jump in volatility."

Yung-Yu Ma, Chief Investment Officer of Wealth Management at Bank of Montreal, said, "The 'Trump trade' is likely to catch its breath before the Democratic nominee becomes clearer. This news has also shaken currency and bond markets, and fund managers in emerging markets expect some early 'Trump trades,' including selling some currencies in Asia and Latin America and buying El Salvador bonds, will be closed, bringing short-term bullish sentiment to risk assets. Concerns about the strong US dollar under the Trump administration, along with tariffs and the Republican Party's potential overwhelming victory, have begun to put pressure on emerging assets, which continue to languish under the uncertain interest rate schedule of the Fed."

View 4: More bullish on Democratic victory

Jack McIntyre, portfolio manager at Brandywine Global Investment Management, believes that risk assets, including emerging markets, may be initially bullish, and the market is more inclined to see a Democratic victory in the House of Representatives.

Jung In Yun, CEO of Fibonacci Asset Management Global Pte, expressed concern about the possibility of Trump's re-election, believing that his protectionist policies could have a negative impact on trade, geopolitical risks would intensify, supply chain impacts could become more frequent, and inflation would rise. This macroeconomic environment poses serious challenges for industries that rely on global supply chains and stable market conditions, such as automobiles, biotechnology, and real estate.

(2) Spotlight on Harris

US President Biden supports Vice President Kamala Harris, but that does not guarantee her nomination as the Democratic candidate, as representatives of the Democratic National Committee can vote for their own chosen person. The most popular candidates in recent weeks have been California Governor Newsom and Michigan Governor Whitmer, but Harris remains the most likely candidate.

Dave Mazza, CEO of Roundhill Financial, said that investors should expect significant volatility. If Vice President Harris can quickly mobilize and bring substantial impact to Trump, then we can expect the volatility to continue. However, if Trump continues to lead in the polls and investors believe his victory is inevitable, the 'Trump trade' will take over and volatility will decrease. Therefore, whether Harris, who has high hopes, can bring substantial impact to Trump is the most concerned focus of the current market.

The following are Harris's main political positions:

Politics:

--Support the transition to universal healthcare but with a role for private insurance plans;

--Advocate for a more aggressive drug pricing policy, including linking US prices to prices negotiated by other wealthy countries;

--May continue many of Biden's foreign policy goals, including supporting Ukraine and maintaining alliances in the Asia-Pacific region;

--May take a more sympathetic stance toward Palestinians in the Israel-Hamas conflict.

Economy:

--Expected to push forward the Biden administration's economic policies, including the Infrastructure Agreement and Inflation Reduction Act;

--Support the raising of corporate taxes and criticize Trump's tax reduction policy;

--Support the proposed policies for the middle class, such as providing refundable tax credits for low-income individuals and couples.

Dealing with Climate Change:

--Support policies to deal with climate change, including transitioning to 100% renewable energy;

--Helped enact a $20 billion plan to provide funding for climate and clean energy projects.

Immigration:

--Over time, her position has evolved to support potential ICE reform and criticize Trump's border wall;

--Support the bipartisan border security agreement (ultimately rejected by Senate Republicans).

Harris vs Biden main differences:

--Harris supports the transition to universal healthcare, although private insurance plans also play a role. This is more progressive than Biden's position, which favors a public health insurance option in the exchange under the Affordable Care Act;

--Harris calls for a more aggressive drug pricing policy than Biden, such as linking US prices to prices negotiated by other wealthy countries;

While both support a nationwide minimum wage of $15, Harris is more outspoken about punishing companies that violate labor wage regulations;

Harris advocates for stronger pro-union policies, including repealing the "right-to-work" law and allowing for secondary boycotts, which goes beyond Biden's labor stance;

Harris proposes specific tax credits for renters to cover rent and utility costs that exceed 30% of their income, a policy not highlighted in Biden's platform;

During the pandemic, Harris approved $2,000 stimulus payments per month, which is more generous than Biden's proposed implementation;

Harris opposes the Trans-Pacific Partnership and has expressed she would vote against the North American Free Trade Agreement, positions that are more protectionist than Biden's stance.

Editor/Somer