At the beginning of the new week, investors will be busy determining whether President Biden's decision to withdraw from re-election and instead support Vice President Harris will increase or decrease Trump's chances of regaining power?
At the beginning of Monday's Asian trading session, the global market was already focused on this topic, triggering a preliminary market trend: some typical "Trump trades" represented by long positions in the US dollar and bets on the steepening yield curve of US bonds showed signs of "silence" and fading heat in the morning of the day. At the same time, US stock futures rose slightly after opening on Monday, while gold rose in the safe haven atmosphere of increasing political uncertainty in the United States.
US President Biden stated on Sunday that he will not seek re-election as the President of the United States. For weeks, the Democratic Party has been pressuring the 81 year old to withdraw from the race, hoping to increase the chances of defeating Trump. In the end, Biden announced the decision on Sunday and supported Vice President Harris, who is 59 years old, as the Democratic presidential candidate. Currently, there are only a few weeks left until the Democratic Party's official nomination convention in mid August.
Biden issued a statement on social media platform X, saying, "Although I have always intended to seek re-election, I believe that handing over the baton now is in the best interest of our party and our country, and I will wholeheartedly focus on fulfilling my presidential duties for the remainder of my term.
It's time to unite and defeat Trump, let's do it this way, "Biden said in a subsequent post.
Recent poll numbers show that Trump's lead has continued to widen in the past few weeks, especially after the last attempted assassination. Democrats hope Harris can regroup in November: some market polls show that if she competes with Trump, her performance will be better than Biden's.
After Biden announced his withdrawal on Sunday, some betting market odds data did show a slight decrease in Trump's chances of winning the November election. However, even so, its chances of winning the election are still over 60%, far ahead of Harris, who is currently the most likely candidate to ultimately win the Democratic nomination.
Of course, a significant impact of Biden's early withdrawal from the election is that market participants seem less confident that Republicans will win the November election with a sweeping sweep of the presidency and both houses of Congress. The US Congress is currently divided, with the House of Representatives narrowly controlled by Republicans and the Senate controlled by Democrats.
Investors typically believe that a divided Congress is more advantageous for the market, as it makes it more difficult for either party to forcefully pass unexpected extreme policy changes, thus at least having a certain balancing effect. This may also be the reason why US stock futures rose at the beginning of the day.
In the history of the United States, there have not been many cases of incumbent presidents voluntarily not seeking re-election, with the most recent example dating back to Lyndon B. Johnson in 1968. As we mentioned last week, on March 31, 1968 (Sunday), Johnson announced his withdrawal from the 1968 election; The next day, the S&P 500 index closed up 2.5%.
However, it may not be possible for the US stock market to rise so much this time. At the beginning of this week, the market's focus may also be more on the success or failure of some 'Trump deals'.
From the performance after the opening of the day, the US dollar spot index fell by 0.2% at the beginning of Monday's trading session, while non US currencies such as the Mexican peso, which have recently been under significant pressure due to concerns about Trump's tariff policies, have risen. This seems to indicate that many market traders believe that it will be more difficult for Trump to win the election after his opponent is likely to be Harris. Although Trump himself is extremely confident, he publicly stated shortly after Biden announced his withdrawal that Harris is "easier to defeat" than Biden.
LGA Yangol, head of emerging markets research and strategy at Credit Agricole, said, "People's subconscious reaction is that this is not good for the US dollar, but it's too early to draw conclusions now. This largely depends on Harris' initial performance, his choice of running mate, and the results of public opinion polls in swing states
In addition, there has been a situation in the US bond market where the "Trump deal" has been suppressed. The early intraday decline in long-term US bond yields was significantly greater than that of short-term bond yields, indicating a slight reversal in the steepening trading of the yield curve associated with Trump's victory.
Of course, no matter how volatile the US political arena may be, in the eyes of some investors, gold with safe haven properties remains one of the excellent investment options. Spot gold rose by 0.5% during the early trading session in Asia, as the uncertainty surrounding the US presidential election intensified and safe haven sentiment benefited gold.
The gold price hit a record high last week. Since the beginning of this year, gold prices have received support due to increased market bets on the Federal Reserve's shift towards loose monetary policy. Lower interest rates are usually favorable for interest free asset gold.