Markets could unwind the ‘Trump trade’ after Biden drops out of

The “Trump trade” could unwind after President Joe Biden withdrew from the 2024 presidential election, throwing his weight behind Vice President Kamala Harris.

Biden’s alarming debate performance and the assassination attempt against former President Donald Trump had spurred markets to position price in another term for the Republican challenger.

The Trump trade refers to plays on stocks that are expected to benefit if the former president returns to the White House.

CNBC previously reported that Wall Street sees a Trump win as good for stocks as the Republican candidate has called for lower taxes and deregulation. Conversely, traders predicted green energy stocks would be hit by Trump’s proposed tariff hikes, which some economists said could lead to higher inflation.

Asia markets were mostly lower Monday morning in the first region to resume normal trading following Biden’s announcement.

Michael Brown, senior research strategist at Australia-based broker Pepperstone, told CNBC the withdrawal was largely expected, given mounting pressure from Democrats and a “disastrous debate performance.”

Brown said he expects volatility across asset classes, given that uncertainty has been injected into the election, with the race for the White House now considerably more open. The strategist predicted the U.S. dollar would soften as some of the “Trump trade” unwinds, adding that he believes the prospect of a Democratic victory has marginally increased.

He also expects stocks will fall in the near term, but noted any dips should be seen as medium-term buying opportunities, given that the Federal Reserve is still expected to cut rates, and both economic and earnings growth remain resilient. The U.S. is slated to report its personal consumption expenditure numbers — the Fed’s preferred inflation gauge — for the second quarter on Thursday.

David Roche, president of Quantum Strategy, said in a note early Monday that Harris is likely to be endorsed by the Democratic Party, pointing out that “changing Harris at this point would be even greater chaos and would raises a lot of issues about existing funding for the joint Biden Harris ticket.”

Roche said, however, that a Harris nomination increases the chance of a Trump win, but lowers the odds of the Republicans winning both houses of Congress.

In contrast, Charles Myers, founder and CEO of advisory firm Signum Global Policy, took a different position on Harris’ potential nomination.

Speaking to CNBC’s “Squawk Box Asia,” Myers said that Harris being the frontrunner for the Democratic nomination has made it “a whole new race.”

“There’s a new candidate with an enormous amount of unity and enthusiasm behind her….