Biden’s Withdrawal Triggers Volatility in Global Markets, Sparking Concerns Among Traders

President Joe Biden’s withdrawal from the White House race has sent ripples across global markets, impacting stock traders, including those in China. Following Biden’s announcement, Chinese stocks have seen significant volatility, marked by a sharp rise in the 10-day realized volatility of both the CSI 300 Index and the Hang Seng Index, reaching a level not seen in three months. This uncertainty in the political landscape has made it challenging for investors to navigate their portfolios, especially as they await the Democratic National Convention in August, where a new candidate may emerge.

Market analysts suggest that Biden’s exit is expected to contribute to increased volatility in the near term. According to Kristina Hooper from Invesco, uncertainty surrounding the Democratic ticket could prolong the unpredictable nature of global markets. The recent drops in the CSI 300 Index, including a notable 2.1 percent decline on Tuesday, reflect traders’ reactions to the re-emergence of former President Donald Trump’s trade policies and potential tariffs on Chinese imports. Many fears center around Trump possibly imposing a 60 percent tariff, which could drastically curb China’s economic growth and overall export capacity, leading to a slowdown that could be harmful to the country’s economy.

Amid these economic shifts, investors are advised to closely monitor prevailing opinion polls as Kamala Harris may lead the Democratic ticket forward. If Harris can consolidate support, trading dynamics may change. However, should Trump continue to gain traction in polls, the “Trump trade” is likely to dominate sentiment, leading to further market instability. Strategists believe that investors may need to rethink their strategies, possibly moving away from companies heavily reliant on exports to manage the heightened geopolitical risks and the negative sentiment they can bring to the markets.