For more than a year, Wall Street has been predicting that Joe Biden is in such a poor mental state that he will drop out of the 2024 presidential race.
Yes. By early 2023 it was becoming increasingly clear to investors that this man was not fit to run the country, much less serve another term.
Now that he’s out of office, this is not only a big political story, but also a big story for markets and the economy.
Markets hate uncertainty, and my sources say one of the reasons stocks plummeted after the Dow Jones Industrial Average hit an all-time high last week was the uncertainty over who former President Donald Trump and J.D. Vance would be running against.
So the Street was preparing for the worst: that Biden would drop out of the race just before the nomination is officially made at the Democratic National Convention next month, endorsing an incompetent vice president, Kamala Harris, who, if the polls are to be believed, has a good chance of winning the presidency.
Get ready for more market turmoil as investors try to predict the Democratic nominee and speculate on his chances of beating Trump.
“The conventional wisdom is that Kamala can’t beat Trump,” one financial adviser to wealthy individuals told me on Sunday.
“With Kamala as the top candidate, I don’t see any room for further upside in the market. I don’t think the market likes her. She’s not stable.”
Yes, things are going to be interesting next week. Some of the questions we will be asking over the next few days include:
If Biden isn’t healthy enough to run for president, is he healthy enough to be president?
Why won’t he hand the keys to the White House to Harris, who he claims is the right person to succeed him?
Which Democrat is going to demand an open convention to sort all this out?
But here’s where things get really dangerous for investors: a look at the polls shows this election is far from over.
There was something called the Trump trade: people jumping on stocks and certain sectors of the market when it seemed likely that Trump would win the presidency and that Republicans would take control of both houses of Congress after Biden’s terrible debate performance and subsequent disastrous attempts to bounce back.
My trading sources noticed that investors started locking in some profits on the Trump trade last week when it became clear that Biden was heading for the exits, especially after contracting COVID-19.
The bet: Despite Biden’s weaknesses, polls show he’s not going to lose by a landslide yet. The Democrats have a better candidate who has a chance to beat Trump, whose weaknesses we all know about. The Democrats might even be able to keep the House and possibly the Senate.
If Democrats can hold onto one house of Congress, they could allow Trump’s tax cuts to lapse even if Harris loses, so that could be taken into consideration.
Of course, that’s bad for investment and the economy, given that Democrats have tended to lean left on economic issues in general no matter who’s in power.
Traders say depriving Americans of Trump’s economic policies, such as lower corporate taxes and deregulation, is bad for the stock market, which is why we saw a broad sell-off last week even as Trump appeared on track to win the Republican convention.
Meanwhile, the good news is that Americans can choose between a strong Republican candidate in Trump and Vance, and a Democratic candidate with two sentient human beings.
Harris will likely top the list of candidates, but if Wall Street and Democratic Party rumors are to be believed, moderate Pennsylvania Governor Josh Shapiro will be her running mate.
One of the reasons Biden ultimately caved was because his financial resources dried up, but the situation has changed and Americans will now experience a real election, with the well-funded candidate likely to serve out his term.
Now, according to Wall Street Democratic insiders, big donors are prepared to do whatever it takes to defeat Trump.
“Donors are prepared to give big sums,” a top Wall Street executive with ties to the Democratic Party told me just minutes after Biden made his public announcement.
The bad news: Another leading Wall Street Democrat told me the plan is not just to nominate Harris but to have a “Democratic convention” — which sounds appealing given Harris’ weaknesses, but will only lead to confusion.
And again, the Wall Street study I mentioned detailed this more than a year ago, when the Washington press corps was ignoring Biden’s obvious and continuing mental and physical decline.
In other words, things could get worse.
