Global Markets Brace for Biden Exit and Trump’s Return

Market Volatility Increases as Traders React to Potential Biden Exit and Trump’s Re-Election Prospects

Editorial Team (ET)July 10, 2025

The political landscape in the United States is currently teeming with speculation and uncertainty. The recent debate between President Joe Biden and former President Donald Trump has left markets reeling, as traders grapple with the possibility of Biden stepping down from his re-election bid. This scenario, which seemed unlikely until recently, has started to gain traction, causing significant shifts in global markets. The stakes are high, and the impact of a potential Biden exit is being felt across currencies, bonds, stocks, and even cryptocurrencies.

The Biden Debate Fallout

The debate between Biden and Trump was nothing short of a spectacle. However, it wasn’t Biden’s policies or plans that captured the headlines but his apparent struggles on stage. Concerns about his age and ability to serve another term have intensified, prompting traders to adjust their strategies. The bond market was one of the first to react, with yields on benchmark 10-year Treasuries jumping by as much as 20 basis points in the days following the debate. This sudden movement highlights the market’s sensitivity to political developments and the significant impact of leadership changes on financial instruments.

Historical Context

Presidential elections have always been pivotal moments for markets. The last president to opt out of a re-election campaign was Lyndon Johnson in 1968, a decision that sent shockwaves through financial markets. The implications of such a decision today are even more profound, given the interconnectedness of global economies and the current volatility in financial markets. Investors are acutely aware of the historical precedent and are bracing for a similarly disruptive event if Biden decides to bow out.

Market Sentiment and Speculations

Betting markets are now buzzing with activity, reflecting the growing speculation about Biden’s political future. According to recent data, there is less than a 50% chance that Biden remains a candidate. This uncertainty has led fund managers to hedge their bets, favoring the dollar and short-term debt as protective measures against potential market turbulence. The recalibration of portfolios is in full swing, with traders preparing for a variety of outcomes during the Fourth of July holiday and the subsequent weekend.

Dollar's Signal

One of the earliest indicators of market adjustment to a potential Trump victory was the performance of the dollar. The greenback surged in the hours following the debate, a move driven by traders anticipating Trump’s return to office. Trump’s proposed economic policies, including tax cuts and high tariffs on imports from China and other countries, are expected to boost inflation and, consequently, the dollar. Analysts from JPMorgan Chase & Co. have noted that a Trump victory could result in a stronger dollar and higher inflation, given his stance on tariffs and immigration.

Treasury Market Reactions

The Treasury market has been a focal point of activity post-debate. The yield-curve trade, where investors buy shorter-maturity notes and sell longer-term ones, has gained momentum. This strategy, recommended by several Wall Street strategists, anticipates sticky inflation and higher long-maturity yields in the event of another Trump term. The two-day span following the debate saw a sharp increase in the steepness of the yield curve, the most significant since October. This steepening reflects traders’ expectations of future economic conditions under Trump’s policies.

Stock Market Movements

The prospect of a Trump victory has buoyed certain stocks, particularly those in sectors expected to benefit from his policies. Health insurers like UnitedHealth Group Inc. and Humana Inc., banks, and energy companies have seen gains as investors anticipate looser regulations and a more business-friendly environment. The broad market has responded positively, reflecting the general perception that Republican administrations are more favorable to business interests.

Financials ETFs Strategy

Investors have been quick to adjust their strategies in the exchange-traded fund (ETF) market. The Financial Select Sector SPDR Fund (XLF), which tracks the performance of financial stocks, saw significant inflows following the debate. This trend indicates that investors are betting on deregulation and a steeper Treasury curve under a potential Trump presidency. However, not all Trump-related investments have gained traction. The MAGA ETF, designed to invest in Republican-friendly stocks, has struggled to attract assets, highlighting the selective nature of investor confidence.

Asian Market Impacts

The ripple effects of the US political climate extend far beyond its borders. Asian markets, particularly those in China and Japan, are also reacting to the speculation of a Trump victory. Trump’s hardline stance on tariffs and trade relations poses a significant risk to Chinese equities. Japanese stocks with high exposure to the Chinese market could also suffer if Trump is re-elected. Strategists at Invesco Asset Management Japan have noted the potential negative impact on these markets, underscoring the global implications of US political decisions.

Crypto Market Implications

The cryptocurrency market is another area experiencing shifts due to the political uncertainty. Trump’s recent engagement with the crypto industry has led to speculation that his return to office could benefit cryptocurrencies like Solana and Bitcoin. Trump’s promise to ensure all future Bitcoin mining is done in the US has added a layer of intrigue to the market. Asset managers VanEck and 21Shares have filed for ETFs that would invest directly in Solana, anticipating a favorable regulatory environment under Trump. The potential for a shakeup in the Democratic ticket is also seen as a bullish factor for Bitcoin, as political instability often drives investors towards decentralized assets.

Conclusion

The current political landscape in the United States is driving significant adjustments in global markets. The possibility of Biden stepping down from his re-election bid and the potential return of Trump to the White House have created a highly volatile environment. Traders and investors are recalibrating their portfolios, preparing for a range of outcomes. As we move closer to the election, the interplay between political developments and market reactions will continue to be a critical area of focus.

Donald TrumpJoe Biden

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