Financial
markets
are
slowly
starting
to
absorb
the
possibility
that
what
was
once
a
toss-up
presidential
election
campaign
has
taken
a
notable
turn.
While
it
may
yet
become
an
overstatement
to
call
the
June
27
debate
between
President
Joe
Biden
and
former
President
Donald
Trump
a
watershed
moment,
the
incumbent’s
halting
and
mumbling
performance
has
changed
views
about
where
the
race
is
headed.
In
both
polling
data
and
the
predictions
market,
the
Republican
challenger
has
become
a
solid
favorite,
up
mid-single
digits
in
several
recent
polls,
with
the
specter
lingering
that
Biden
won’t
even
be
his
party’s
nominee
come
November.
That
has
put
investors
in
a
quandary
of
how
to
handicap
what
a
Trump
presidency
would
look
like
from
an
economic
and
market
standpoint.
“As
Trump’s
numbers
rose
earlier
[last]
week,
people
started
to
speculate
that
a
Trump
win
would
mean
a
little
bit
more
mid-
to
long-term
inflation,
potentially
slower
economy,
which
is
why
the
yield
curve
steepened
a
little
bit,
and
which
is
why
longer-term
bonds
got
a
little
pressure
earlier
in
the
week,”
said
Mark
Malek,
chief
investment
officer
at
Siebert
AdvisorNXT.
“We’re
going
to
watch
that,
because
there’s
no
definitive
sort
of
direction
yet,
but
we
feel
that
the
market
is
starting
to
try
to
figure
that
stuff
out,”
he
added.
Stock
market
reaction
has
been
fairly
benign
so
far:
The
S
&
P
500
has
continued
to
scale
record
heights,
albeit
gradually,
and
is
up
about
1.5%
since
the
last
close
before
the
debate.
.SPX
mountain
2024-06-28
S
&
P
500
performance
since
the
debate
However,
the
bond
market
has
had
a
bit
more
of
a
reaction.
The
benchmark
10-year
Treasury
yield
has
gradually
declined
and,
perhaps
more
importantly,
has
moved
further
below
the
2-year
note.
The
phenomenon,
known
as
an
inverted
yield
curve,
has
been
a
nearly
infallible
predictor
of
recessions,
though
the
current
inversion
started
in
July
2022
and
there
has
not
been
an
official
recession
since.
The
inversion
has
steepened
in
the
past
several
days
as
Trump
has
shown
a
post-debate
polling
bounce,
indicating
misgivings
about
the
economy’s
prospects.
Handicapping
a
second
Trump
presidency
Other
market
reaction
regarding
a
potential
Trump
victory,
as
measured
by
Bank
of
America’s
chief
investment
strategist,
Michael
Hartnett:
winners
were
rates
volatility,
bets
that
benefit
as
the
yield
curve
steepens,
banks
and
technology.
Losers
have
featured
longer-dated
bonds,
homebuilders,
renewable
energy
stocks
and
emerging
market
currencies.
Hartnett
also
noted
that
the
odds
of
a
Trump-led
Republican
sweep
of
the
White
House
and
both
chambers
in
Congress
have
swelled
to
36%.
Reading
the
tea
leaves,
though,
has
been
difficult.
The
first
Trump
presidency
and
some
of
his
campaign
rhetoric
nevertheless
has
led
to
guesswork
about
what
could
be
ahead.
“The
extension
of
the
2017
tax
cuts
and
potential
deregulatory
agenda
of
former
President
Trump
are
starting
to
get
priced
into
the
market,”
Ed
Mills,
Washington
policy
analyst
for
Raymond
James,
said
in
a
note.
“This
particularly
favors
financials
and
there
will
be
an
expectation
of
more
M
&
A
approval
in
a
Trump
presidency.
A
potential
for
more
inflationary
policies
should
also
be
closely
monitored.”
‘Reverse
Goldilocks’
reaction
Inflation
has
been
a
major
problem
for
Biden
as
the
consumer
price
index
has
risen
more
than
19%
on
his
watch,
compared
with
less
than
8%
during
Trump’s
time
in
office.
But
it
was
the
president’s
stumbling
debate
performance
that
brought
out
the
knives,
with
some
congressional
Democrats
and
mainstream
media
outlets
such
as
The
New
York
Times
calling
for
him
to
step
aside.
PredictIt,
a
widely
watched
though
thinly
traded
predictions
market,
put
Trump’s
chances
of
victory
around
59%
as
of
Monday
afternoon.
However,
in
a
switch,
Biden’s
defiant
statements
that
he
would
stay
in
the
race
caused
a
swing
on
the
betting
site,
giving
him
a
29%
chance
of
victory
compared
with
15%
for
Vice
President
Kamala
Harris.
In
recent
days,
there
had
been
heavy
speculation
that
Harris
could
step
in
for
Biden
on
the
ballot,
and
she
had
overtaken
his
chances
of
being
the
nominee
before
that
changed
Monday.
PredictIt,
though,
now
gives
Biden
a
56%
chance
of
being
the
Democrat
nominee,
with
Harris
falling
12
points
to
just
31%.
Chris
Krueger,
Washington
strategist
for
TD
Cowen,
called
this
week
“Biden’s
Gauntlet”
as
it
will
be
crucial
to
his
viability
as
a
candidate.
“Biden
remains
the
presumptive
nominee…for
[the]
time
being,”
Krueger
wrote,
adding
that
Biden’s
interview
Friday
with
ABC’s
George
Stephanopoulos
was
“a
bit
of
a
reverse
Goldilocks:
just
good
enough
to
stay
in
the
race,
but
not
good
enough
to
alleviate
concerns
about
acuity.”
—
CNBC’s
Sarah
Min
contributed
to
this
article.
Correction:
Mark
Malek
is
chief
investment
officer
at
Siebert
AdvisorNXT.
An
earlier
version
misstated
the
name
of
the
firm.
