Wall Street is scrutinizing the U.S. political future as President Joe Biden’s exit from the race creates more uncertainty. Biden’s withdrawal from the election removes a key unresolved issue. Since the president’s poor performance in the June debate, many analysts have predicted that Trump would be more likely to win in November. However, Biden’s endorsement of Vice President Kamala Harris over the weekend confounded those expectations. “This adds uncertainty to the positive side of the Democratic Party because in a sense they got what they wanted, which was a younger candidate because a majority of Americans surveyed think President Biden is too old. I can’t run for re-election,” he said. Sam Stovall, chief investment strategist at CFRA Research. “The question now is, at 78 years old and still harping on about shark bites, is Trump too old?” Stovall added: “The bulls and bears are going to continue to exist because both sides are talking about it. Uncertainty, uncertainty about the presidency has increased.” Many investors said it was too early to determine the outcome of the election. With more than 100 days until the election and the Democratic National Convention taking place next month, they expect to need more information about the candidates and their policies. “Red wave”? Despite the weekend’s events, some on Wall Street still believe a “red wave” – meaning former President Donald Trump’s victory in November and Republican control of both chambers of Congress in January 2025 – is still a factor. The most likely scenario. Since Biden’s departure was announced over the weekend, PredictIt last gave Trump a 61% chance of winning, compared to Harris’ 39% chance. CFRA’s Stovall said that could be good news for stocks. The strategist found that the S&P 500’s average return in the first calendar year of a unified government under a Republican candidate since World War II was “better than expected,” at nearly 13%. The data cover eight years after a Republican sweep and 24 years after a Democratic sweep. Stovall said the next most likely scenario is a split Congress for Democratic candidates, an outcome that would still be positive for the market. Historically, this scenario has resulted in a stock market gain of 16%, compared with an average gain of 10.6%. “It seems like the biggest possibility is a red wave,” Stovall said. “If it’s not a red wave, then it’s very likely that there will be a split in Congress.” Trump’s trade hurt? To be sure, Sunday’s announcement could put the brakes on so-called Trump trade-offs, which have gained some momentum since the June 27 debate. Industries likely to outperform during the period include energy and financials, which rose 4.5%, and rose 1.6% each from the end of June to Friday’s close. Healthcare, a third industry that has been on the rise since the debate, may also come under pressure. XLV mountain 2024-06-27 XLV Since June 27 “We could see modest feedback from ‘Trump Trade’ services, with Medicaid/Exchanges/Hospitals benefiting, while Med Adv underperforms,” Wells Fargo analyst Stephen Baxter said. “Whether that momentum builds will likely depend on how the polls turn out in the coming weeks, both in the presidential race and in key congressional races.” Baxter added: “Key questions include whether Harris is favored by other Democrats and ultimately the vice president.” Candidate challenges and whether there are differences in political platform.” Oppenheimer said one stock that may benefit is online advertising company Trade Desk. “We expect political advertising to accelerate, which will benefit TTD significantly,” the company said. Still, some market observers believe the main drivers of the stock market will remain the outlook for interest rates and company fundamentals. , rather than the election results. Indeed, some investors are warning of the pitfalls of election-related trading, even as it becomes clearer who might win. “No trade, no fill-in-the-blank trade will succeed unless it’s easy to say on the campaign trail but hard to put into practice,” said Chief Market Strategist Art Hogan. In B. Riley Wealth. “Whether it’s a change in fiscal policy or a complete change in the way the government collects money and spends it.” Hogan warned against investing in the so-called Trump trade, which focuses on oil and gas companies rather than alternative energy stocks, saying the latter performed better than expected under the previous Trump administration. “It would be foolish to try to build some expectations of a new government 100 days before an election,” Hogan said. Ultimately, Kim Forrest, chief investment officer at Bokeh Capital Partners, said the results of the second-quarter earnings season, now underway, could push stocks higher. . This week, about a quarter of the S&P 500 companies will report earnings, including some from major giants like Microsoft. “It really depends on what the income is,” Forrest said. “At the lowest level, what we’re doing is buying and selling cash flow. If cash flow looks like it can still go up, we’ll buy.” — CNBC’s Fred Imbert contributed to this report.
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