Trump's Post-Debate Bounce Jolts Markets
What once looked like a straightforward Biden re-election path has taken an abrupt detour following the president's stumbling debate performance. In the aftermath, financial markets are rapidly recalibrating to account for Donald Trump's improving chances of returning to the White House in 2024 - and all the policy shifts that could entail.
Sponsor
Biden out by August 19? [Full Story >>]
While Biden had been a solid favorite just weeks ago, his forgettable June 27th showing has given the former president a decisive bounce in both polling data and prediction markets. Several recent surveys show Trump opening up mid-single digit leads over Biden in critical battleground states like Georgia, Nevada and North Carolina.
On the PredictIt betting exchange, his re-election odds have surged from underdog territory under 40% to around 60% in recent days, repositioning him as the front-runner. The swing has been so dramatic that the site has Biden trailing his own VP Kamala Harris as the potential Democratic nominee at times, before regaining a narrow advantage in that market earlier this week.
This rapidly evolving landscape has catalyzed some pronounced repositioning across various asset classes as investors brace for the possibility of a second Trump term - and the economic policies that could accompany it. Here's a look at some of the early moves:
Yield Curve Inverting Further: One of the biggest initial reactions has come in bond markets, where longer-dated Treasury yields have dropped relative to shorter rates. This extends the ongoing inversion of the yield curve, a reliable predictor of incoming recessions that could intensify if Trump's more inflationary agenda makes a return.
Sector Rotation: According to Bank of America's data, traders have also been actively rotating into potential Trump beneficiaries. Bets on rate volatility, banks, and big technology names have outperformed, while longer bonds, homebuilders, renewable energy and emerging market currencies have lagged.
Sponsor
Trump’s Former Wingman Bets Big on AI [Full Story >>]
Rising GOP Sweep Odds: The likelihood of a Republican sweep across the White House and both chambers of Congress has jumped to 36%, based on BofA's analysis. This raises the potential for conservative legislative priorities like tax cuts and deregulation to find an easier path to enactment.
To be sure, it's still early in the campaign cycle and Biden could regain his footing with stronger performances down the stretch. But for now, Trump's growing advantage is upending what had been a relatively sanguine market outlook premised on Biden's easy re-election. That repricing could accelerate if the former president's odds continue improving from here.
Which underscores the importance of ensuring your portfolio doesn't take any unnecessary hits from poll-driven volatility in the months ahead. Working closely with the right financial advisor to batten down the hatches could make all the difference in smoothing out the inevitable political storms on the horizon.
Sponsor
7 Mistakes People Make When Choosing a Financial Advisor
Working with a financial advisor can be a crucial part of any healthy retirement plan. But choosing the wrong one could wreak havoc. Check out these 7 secrets comfortable retirees know about hiring an advisor, so you can work to potentially save years of stress. See the list.