Wall Street Longs for ‘Less History’ With Politics Omnipresent

(Bloomberg) — Markets already had plenty to deal with as summer kicks into full gear, from assessing the Federal Reserve’s rate-cut path to the heart of earnings season. But 2024’s presidential race keeps crowding into the headlines.

A week after an assassination attempt on Republican Donald Trump shook investors, President Joe Biden said Sunday he will not seek reelection and endorsed Vice President Kamala Harris to become the Democratic nominee. 

With Biden’s historic move less than four months from the November election, the political chaos threatens to fuel gyrations on Wall Street, at least in the short term, said market observers. And the so-called Trump Trade recommendation — good for energy companies, banks and Bitcoin, while bad for electric vehicles and renewables — may fray, after gaining momentum after Biden’s disastrous presidential debate.

Here are some early comments from investors:

Wayne Kaufman, chief market analyst at Phoenix Financial Services

I wish we were having less history. Just last week my team was discussing the market implications of an assassination attempt. Whether the buy the dip people come back amid all this uncertainty is questionable. Valuations have been an issue, AI optimism has done a lot to hold up the market, and we’re going into August and September, which have historically been weak months. But in general this has been a historic market.

Julie Biel, portfolio manager and chief market strategist at Kayne Anderson Rudnick

There is now more uncertainty. We just don’t have a lot of precedence for a situation with a candidate who did not go through the normal primary process. So we are once again continuing our very long-term love affair with unprecedented times. And while we might feel like we are getting used to everything but business as usual, this is still a very large spoonful of uncertainty to be swallowing.

Matt Maley, Chief Market Strategist at Miller Tabak Co.

Trump trades such as Bitcoin, energy will start to unwind and some trades that got hit like solar stocks or EVs can bounce back. But it’s still a lot of uncertainty and markets don’t like that. And we’ll see a big spike in volatility between now and Labor Day and through September. 

Yung-Yu Ma, chief investment officer at BMO Wealth Management

The Trump trade is likely to take a breather until it becomes clearer who the Democratic nominee will be. In broad terms, this event injects even more political uncertainty into the markets, which is likely to result in some near-term choppiness.

Barry Knapp, managing partner at Ironsides Partners 

Ultimately the uncertainty has gotten a lot higher. Now, what does this mean for how futures will open? That isn’t clear. Bitcoin moved a bit. But we also just had a messy week, which I don’t think has much to do with Trump. I think that’s more about the economy weakening, and the Fed haltingly moving toward a 50 basis point cut in September. Ultimately there’s a lot going on, and this is more uncertainty.

Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors

The immediate impact is to add uncertainty to the Republican sweep narrative that’s been taking hold of markets. Beyond that, it’s all up in the air until we have more clarity on who the Democratic candidate will be.

Art Hogan, chief market strategist at B. Riley Wealth

President Biden dropping out of the race had already started to get priced into the marketplace. The Trump trade, if there actually is one, is indistinguishable from the fact that small caps are being rotated into because of the potential for lower interest rates. The Fed will likely cut in September. The only thing that stands out in the current Trump trade seems to be a bit of a bump in Bitcoin and the rest of the cryptocurrencies as he is seen as more favorable to that asset class.

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