Global markets made solid gains after President Joe Biden dropped out of the 2024 presidential election Sunday and endorsed Vice President Kamala Harris as the Democratic nominee.

European stocks saw an uptick and morning trading in the US was higher following Biden’s announcement.

The Dow rose 123.7 points, or 0.3%. The S&P 500 was up 0.7% and the Nasdaq was 1.1% higher. European markets were also higher, and Asian markets closed mostly lower. US Treasuries rose slightly early Monday, trimming yields, and the dollar was softer against major currencies.

The Trump trade falters

Significant doubt about Biden’s ability to beat former President Donald Trump led Wall Street to begin to price in a Trump victory in November. That became apparent with so-called Trump trades, in which investors bought up stocks they believed Trump’s tariff-heavy agenda could benefit — and they likewise sold off stocks related to green energy and other industries traders believed Trump’s policies could hurt.

Meanwhile, a large number of economists have predicted Trump’s policies would make America’s inflation problem worse, and he would balloon the US deficit. As Trump’s fortunes appeared to advance in recent weeks, US Treasury prices fell and yields rose, which they often do in anticipation of higher inflation.

With the Democratic party now apparently coalescing around Vice President Kamala Harris as its likely nominee, some of those Trump trades could begin to unwind — or at least go on hiatus until new polling begins to show whether or not Harris appears to stand a better chance against Trump than Biden did.

With fewer than 100 days until the US election in November, Sunday’s upheaval could have sent uncertain investors into a worry spiral. But “the fact that Biden endorsed Kamala Harris reduces uncertainty,” said Jay Hatfield, CEO at Infrastructure Capital Advisors. He expects a muted market reaction instead.

“There may be a small unwinding of the Trump trade on Monday as Vice President Harris is perceived to have a slightly better chance of winning,” Hatfield added.

Uncertainty remains

Last week was exceptionally rough for markets. The S&P 500 notched its worst three-day performance of 2024 and Europe’s STOXX 600 logged its worst weekly performance since October, according to Deutsche Bank data.

Some analysts worry that market churn could continue as we get closer to the election.

“Markets are increasingly focused on the US presidential election in November,” wrote Deutsche Bank’s Henry Allen in a research note on Monday. “But there’s heightened uncertainty about the outcome, particularly after President Biden has just become the first incumbent President to withdraw since Lyndon Johnson in 1968.”

Moreover, the S&P 500 has declined in every September since 2020, he said. Over the last three years, September was the worst month of the year for the index.

Still, markets remain unusually strong. The S&P 500 has been higher for 28 of the last 38 weeks, something we haven’t seen exceeded since 1989, he noted.

Stocks tumbled toward the end of last week as a turbulent election cycle and a global tech outage rocked technology stocks in particular.