BIDEN DROPS OUT OF THE PRESIDENTIAL RACE

July 24, 2024

This past Sunday, President Biden announced that he is dropping out of the 2024 presidential race and endorsing Vice President Kamala Harris. Since then, Democrats have largely coalesced around Harris as their replacement nominee, with key players such as Nancy Pelosi, Senate Majority Leader Schumer, House Minority Leader Jeffries, the Clintons, and big donors offering their support. She has also received endorsements from many of those who would possibly run against her, such as California Governor Newsom and Michigan Governor Witmer.

Many polls in recent weeks have shown Harris performing slightly better than President Biden in a hypothetical Trump-Harris race. Despite this weekend’s events, many on Wall Street and beyond still see a “Red Wave” ­– meaning a Trump presidency and Republican control of both houses in Congress ­– as the most likely scenario. Sam Stovall, chief investment strategist at CFRA Research, found that since World War II, the first calendar year with a unified government under a Republican candidate results in a “better than expected” average return of nearly 13% for the S&P 500. The next-most likely scenario is a split Congress, which also tends to yield above-average returns.

The unprecedented nature of such a late change in Presidential candidate from one of the major parties – along with the high probability of more twists and turns ahead – will likely contribute to an increase in volatility, which has been quite low for a prolonged period. Despite this, we think the key directional drivers for the market continue to be interest rates and company fundamentals, not the outcome of the election. Trading around an election is almost always a fool’s errand – even if you manage to correctly pick the winners, items promised by candidates on the campaign trail (tax changes, fiscal spending changes) often prove difficult to implement.

Of course, we’ll continue to monitor the political landscape, as a lot can still happen in the 3.5 months before Election Day. But more importantly, we’ll continue to have our eyes and ears on Fed rhetoric, economic data, and corporate earnings. About one-quarter of S&P 500 companies are due to report earnings this week, including mega-caps like Microsoft.

For our most up-to-date commentary on all these topics, be sure to tune in to our Summer Market Update webinar on July 31st– register here.

Additionally, don’t miss our upcoming Amplified Wealth podcast featuring Michael Townsend, a Washington-based Political Analyst and Managing Director of Legislative and Regulatory Affairs at Charles Schwab.

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