Originally published at: Markets react: Biden drops out of presidential race – InvestEngine Insights
The dramatic US presidential election race continues.
On Sunday, Joe Biden announced he would be dropping out of the presidential race, throwing his support behind current VP Kamala Harris.
Our US election outcome chart gets its third update in a week, as betting odds now reflect Biden’s decision:
His chances have, predictably, now gone to zero, and Kamala Harris’ odds have skyrocketed to 40%. She now has the undivided support of the Democrat party, and looks to be the only real chance the Democrats have of beating Trump.
The odds of a Trump victory have fallen, but only slightly. The initial response of betting markets was to take his probability of victory back down to about 60%, almost exactly where it was before the attempted assassination attempt.
Market impact
The market’s reaction to Biden dropping out of the presidential race has been muted.
Trump was the likely presidential race winner before Biden dropped out, and remains so this morning. Kamala Harris is very likely to be the Democratic candidate selected to run against Donald Trump at the Democratic convention in August, and given she has given no indication of diverging from any of Biden’s key policies, markets have little new information to digest.
What moves markets is changes in companies’ expected earnings, which are not affected directly by presidential odds. While company earnings can be indirectly affected by presidents’ anticipated policy changes, politicians matter less to markets than other factors such as monetary policy and earnings results (which both directly impact earnings expectations). A likely rate cut in September and the outcome of the current earnings season will do more to move markets than guesses around presidential candidates and their policies.
Important information
Capital at risk. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply.
This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.
Tax treatment depends on personal circumstances and is subject to change, and past performance is not a reliable indicator of future returns.