The markets were relatively calm on Monday as investors reacted to the news that President Joe Biden exited the 2024 presidential contest and endorsed Vice President Kamala Harris as his replacement.
Biden’s announcement that he was suspending his reelection campaign brings with it a big degree of uncertainty as Wall Street tries to digest what comes next and what such a big change means for the finance world.
But much of Biden’s departure was already priced into markets as bettors had anticipated for days that he would not be the Democratic nominee. The Dow Jones Industrial Average was up just over 0.3% as of Monday morning while the S&P 500 was up about 1%.
“I think what we’re going to see is continued volatility in the market because … this does shake the race up,” Brian Marks, the executive director of the University of New Haven’s Entrepreneurship and Innovation Program, told the Washington Examiner.
“And I think everyone’s going to be trying to digest what the implications are for President Biden stepping down as the potential nominee for the Democratic Party,” he added.
The stock market tends to underperform when there is uncertainty in the political world.
Some of that uncertainty comes because, while Biden endorsed Harris, she first has to clinch the nomination. Her selection of a running mate also remains an open question for investors. There are many questions for investors to digest as the markets open on Monday.
“Biden stepping down is a whole new level of political uncertainty,” said Gina Bolvin, the president of Bolvin Wealth Management Group. “This may be the catalyst for market volatility that is overdue.”
Given polling that is generally positive for former President Donald Trump’s election bid, some on Wall Street have already been pricing in a Trump presidency. Now that Harris, or another Democrat, will lead the ticket, it could change the party’s trajectory in the polls.
“Trump is still a very strong favorite to win, but Biden was so awful any replacement has a slightly higher chance to beat him,” said James Koutoulas, the CEO of Typhon Capital Management, according to Reuters.
Nevertheless, the markets had likely already priced in Biden stepping aside, given the pressure he has been under from fellow Democrats to drop out. Several news reports last week also indicated that he might drop out, and political betting markets were also indicating that bettors expected a new nominee.
Harris on Sunday said that she was “honored” to get Biden’s endorsement.
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“My intention is to earn and win this nomination,” the vice president said. “Over the past year, I have traveled across the country, talking with Americans about the clear choice in this momentous election. And that is what I will continue to do in the days and weeks ahead. I will do everything in my power to unite the Democratic Party, and unite our nation, to defeat Donald Trump and his extreme Project 2025 agenda.”
The Democratic National Convention, which is being held to choose the party’s nominee, is set to begin in Chicago next month.