Is the U.S. stock market showing signs of nervousness due to President Joe Biden stepping aside for Vice President Kamala Harris, who is performing much better than expected in the polls against Donald Trump?
This question arises as market participants seem to be re-evaluating the political landscape and its potential impact on economic policies. Recent polling data indicates that Kamala Harris is nearly tied with Donald Trump in the upcoming presidential election, creating uncertainty among investors and traders.
A report published by The New York Times (NYT) on 25 July, titled “Harris Narrows Gap Against Trump, Times/Siena Poll Finds,” reveals that the race is a virtual tie, with Trump leading Harris by a slim margin of 48% to 47% among likely voters. This is a significant shift from earlier polls, where Biden trailed Trump by six percentage points.
The stock market’s reaction to these political developments has been mixed. As of 3:20 p.m. EDT on July 25, the Dow Jones Industrial Average was up 253.63 points (0.64%), the S&P 500 Index was up 5.73 points (0.11%), and the Russell 2000 Index was up 32.95 points (1.51%).
Despite these gains, the market has experienced volatility and uncertainty since Biden’s withdrawal from the race on July 21.
Investors might be concerned about a potential Harris presidency, fearing she might not be as market-friendly as Trump. Trump’s policies, which include deregulation and corporate tax cuts, have generally been perceived as beneficial to the market. In contrast, Harris is viewed as more likely to implement regulatory measures and policies that could impact corporate profits.
However, an alternative view presented in a report by Samantha Subin and Pia Singh for CNBC that was published shortly after the market closed suggests that the market’s recent declines are not solely attributable to Harris’s performance in the polls.
According to CNBC, the S&P 500 and Nasdaq Composite dropped on Thursday due to investors continuing to sell some of 2024’s leading technology stocks. This decline builds on the previous session’s losses, reflecting a broader market trend rather than just political developments.
The S&P 500 declined by 0.51% to finish at 5,399.22, while the Nasdaq dropped 0.93% to settle at 17,181.72. In contrast, the Russell 2000 gained 1.26%, showing that investors are rotating into small-cap stocks. The Dow Jones Industrial Average rose 81.20 points (0.2%) to close at 39,935.07, surging nearly 585 points at session highs.
This mixed performance indicates that other factors are at play. CNBC highlighted that investors are ditching tech stocks for a second consecutive day, with significant declines seen in companies like Nvidia, Advanced Micro Devices, Meta Platforms, Microsoft, and Alphabet. Adam Sarhan, CEO of 50 Park Investments, noted that these movements are typical during a bull market’s “great mini rotation,” where one leading sector pauses, corrects, and passes the lead to another sector.
Moreover, CNBC reported that investors are also assessing a second-quarter GDP report showing the economy grew 2.8%, surpassing expectations. This strong economic growth contrasts with the losses in the stock market, suggesting that recent declines might be due to an overdue correction in an overbought market rather than solely political factors.
In conclusion, while Harris’s improved polling numbers might contribute to some market uncertainty, CNBC’s analysis indicates that broader market dynamics and sector rotations are also significant factors influencing recent stock market performance.
Featured Image via Pixabay
