Global markets on alert for Biden exit as Trump-win trades mount

New York – The red-hot Washington debate over whether US President Joe Biden will scrap his run for re-election is spilling into Wall Street, where traders are shifting money to and from the US dollar, Treasuries and other assets that would be impacted by Donald Trump’s return to office.

The recalibration of portfolios kicked off at the end of last week after Mr Biden’s disastrous debate with Trump heightened concerns that the 81-year-old Democrat is too old to serve another term.

The trading action afterwards was most acute in the bond market, where yields on benchmark 10-year Treasuries jumped as much as 20 basis points across the following days.

With speculation now mounting rapidly that Mr Biden could drop out of the race – betting markets see less than a 50 per cent chance he remains a candidate – investors are hastily making contingency plans to react to such an announcement during the Fourth of July holiday and the subsequent weekend.

Even some 16,000km away, in Sydney, they are bracing themselves. Mr Rodrigo Catril, a strategist at National Australia Bank, said “everyone” is preparing trading plans in case Mr Biden ends his campaign.

“Either way, the market is betting on Trump winning the election,” Mr Catril said.

“It seems Democrats are stuck with very difficult choices, none of them easy, and none of them likely to yield a better outcome.”

Here is how the so-called Trump trade is materialising across markets: 

Dollar’s signal

The dollar gave one of the earliest signals as to how markets would adjust to a potential Trump victory, gaining in the hours after last week’s debate. While the greenback received a boost in 2024 from the Federal Reserve’s indications that it intends to keep interest rates for higher longer, the currency got a clear bump in real time as Trump dominated the face-off with Biden. 

“A Trump victory raises the prospect of higher inflation and a stronger dollar, given his promise of more tariffs and a tougher stance on immigration,” JPMorgan Chase & Co strategists led by Ms Joyce Chang said.

Potential losers in the face of a rising dollar and Trump’s expected support for tariffs include the Mexican peso and Chinese yuan.

US stocks gain

The prospect of a Trump victory has supported myriad stocks that stand to benefit from his perceived stances on the regulatory environment, mergers and trade relations. The broad market has powered higher in the wake of the debate.

The turn in the electoral tide since last week has “meant higher stocks as Republicans are generally viewed as more business friendly”, said Mr Tom Essaye, president and founder of Sevens Report. 

Health insurers UnitedHealth Group and Humana and banks stand to benefit from looser regulations. Discover Financial Services and Capital One Financial are among credit card companies that have risen on optimism over Trump, given that pair’s pending deal and speculation around possible changes to late-fee rules.

Energy stocks such as Occidental Petroleum rose after the debate, given the former president is seen as having a pro-oil stance. Private prison stocks such as GEO Group have reacted to his perceived tough-on-immigration views.

Asian Impact

Asia’s markets are not immune to the speculation, either, with US-China tensions simmering and tariffs in play.

Trump has floated slapping 60 per cent tariffs on imports from China and 10 per cent duties on those from the rest of the world as he campaigns for a second term.

“The re-election of Mr Trump should be a negative factor for China equities as Mr Trump supports the idea of imposing substantially higher tariffs on US imports from China,” said Mr Tomo Kinoshita, global market strategist at Invesco Asset Management Japan.

“In that regard, Japanese stocks with high exposure to (the) Chinese market are likely to be hurt if Mr Trump wins.”

Crypto support

Trump has shown support for the crypto industry in recent weeks by meeting industry executives and promising he would ensure all future Bitcoin mining is done in the US. That makes the Solana token – the fifth-largest cryptocurrency with a market capitalisation of about US$67 billion (S$90.6 billion), according to CoinMarketCap – one potential beneficiary of a Trump return to the White House.

Asset managers VanEck and 21Shares have filed for exchange-traded funds that would directly invest in the digital currency. 

While many consider approval a long shot, the thinking among some market participants is that a newly re-elected Trump would appoint a Securities and Exchange Commission chair who is more crypto-friendly than Mr Gary Gensler has been under Mr Biden. That is an outcome that would make a Solana ETF – and a corresponding rally in the token – more likely.

The prospect of a shake-up to the Democratic ticket is also likely to boost Bitcoin, according to Mr Stephane Ouellette, chief executive of FRNT Financial.

Mr Ouellette said: “The crazier that the US political system looks, the better that Bitcoin looks.

“This is the kind of vibe that Bitcoin would go for.” BLOOMBERG