Biden withdrawal announcement: Large market reaction unlikely

Managing Director, Washington Policy Analyst Ed Mills and team look at the potential path forward for the Democratic party following President Biden's decision to drop out of the 2024 race.

While President Joseph Biden’s decision on July 21 not to seek reelection will reverberate through the Democratic party in the coming weeks, the Raymond James Washington Policy team, led by Managing Director, Ed Mills, anticipated days prior to Biden’s announcement the markets would not react in a substantive way to that news.

“We do not anticipate a large or broad market reaction until the Democratic ticket is confirmed and/or whether it appears to tilt the race back in favor of a Democratic White House win and/or a Congressional sweep… and we do not anticipate an immediate change in our election odds,” Mills said.

Those odds have Donald Trump, the Republican nominee, as a 60% favorite to win the 2024 election in November.

In his July 21 statement, Biden endorsed Vice President Kamala Harris to replace him atop the Democratic ticket to run against Trump.

The Washington Policy team further stated: “We have had multiple conversations where the sentiment appears to view Harris as a potential replacement as increasing the odds of a Trump win, while others have asked, ‘How much worse can she do?’ The recent rally in the ‘Trump trade’ and overwhelming view that Trump will win could see some reversal in this scenario or at least a stalling out of momentum. Should a Democratic ticket emerge that appears to tilt the race toward a Democratic win and/or sweep, we would likely see a market reaction – especially given the potential policy implications in 2025, with the December 2025 Trump-era tax cuts for individuals more likely to expire. However, we would note that the policies of a potential Harris administration would largely align with those of President Biden.”

What the Washington Policy team are watching for

The expectation is that VP Harris is best positioned to be the nominee, but others in the Democratic Party want an open convention. Will Democrats unite behind a candidate or will an anti-Harris faction cause further uncertainly for the nomination? Does the ability to inherit the Biden-Harris campaign funds and infrastructure force Democrats to accept a Harris nomination? If so, does Harris select a swing state governor such as Josh Shapiro (D-PA), Andy Beshear (D-KY), Roy Cooper (D-NC), or Gretchen Whitmer (D-MI) to shore up a key state? Would a combination of swing-state governors Whitmer and Shapiro give a bigger boost? Will President Biden step down before his term ends to give a boost to Harris? Many of these questions remain unclear and all will impact the outcome of the race.

All expressions of opinion reflect the judgments of the Raymond James Washington Policy office and are subject to change.

There is no assurance the trends mentioned will continue or that the forecasts discussed will be realized. Past performance may not be indicative of future results. Economic and market conditions are subject to change. Investing involves risk, and you may incur a profit or loss regardless of the strategy selected.