Good morning! On Sunday, President Joe Biden announced he would not seek reelection, and he endorsed Kamala Harris as the Democratic nominee for president.

Stocks and cryptocurrencies moved into the green in overnight trading.

Today’s edition breaks down how financial markets could respond to the weekend news and what Wall Street forecasters say will happen next.

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What markets say about Biden’s drop out

President Joe Biden announced Sunday that he will no longer seek reelection.

Politically, this development changes everything from here out. But the same can’t be said for financial markets, according to signals from digital assets and commentary from Wall Street veterans.

Now, given that cryptocurrencies are the only type of assets available to trade on weekends, their reaction to Biden’s announcement is a useful near-term proxy for broader markets. 

Bitcoin, for one, illustrated just how much markets hate uncertainty. It fell roughly 2.3% immediately after the president shared the initial press release.

A few minutes later, Biden endorsed Kamala Harris as the next Democratic candidate — and bitcoin recovered all its losses to trade above $68,200. 

This chart illustrates the move, with bitcoin’s total market cap dipping then rallying within a few minutes after 2 p.m. ET Sunday.

Ether, the second-largest token behind bitcoin, saw a similar dip and bounce.

Meanwhile, betting odds on the crypto platform Polymarket showed Donald Trump’s victory odds did not change on the news. Harris’ odds jumped from 18% to 31% while Biden’s went to zero.

The Biden-themed meme coin Jeo Boden saw its market cap decline from about $18 million to $6 million. That’s down 99% from its April peak above $700 million — and its trajectory has traced that of Biden’s falling odds on Polymarket.

The response across crypto markets suggests the election may end up being a non-event for equity investors. 

“If people are going to trade headline by headline, they will miss the big picture,” Jay Woods, chief global strategist at Freedom Capital Markets, told me. “The headlines are going to be crazy, but Fed policy is going to drive the bus for markets.”

Two other strategists told me the same on Sunday.

The political theater will undoubtedly heat up, but markets remain dialed in on earnings, interest rates, and economic data. 

That said, volatility will be one variable to keep an eye on.

On Friday the VIX — the so-called fear gauge of Wall Street — spiked above 17 for the first time since April.

It has hovered at historically-low levels for much of this year. 

A higher VIX reading doesn’t mean the stock market will see a dramatic surge or crash at an index level, but it could continue to tick higher if the political backdrop gets murkier.

“Biden stepping down is a whole new level of political uncertainty,” said Gina Bolvin, president of Bolvin Wealth Management. “This may be the catalyst for market volatility that is overdue.”

How do you see the election impacting financial markets, if at all? Hit reply to this email or let me know on X @philrosenn.

*At a glance:

Elsewhere:

🤝 Biden has his VP’s back for 2024. While the sitting president intends to finish out his term, Harris & Co. are now focused on raising new capital and getting in touch with donors. Her team has already started contacting delegates to shore up support ahead of the DNC. (Bloomberg)

📉 Debt is indeed crushing US consumers. High interest rates, high inflation, and expensive mortgages have left everyday Americans saddled with unaffordable monthly bills. While policymakers tout the strength of the overall economy, the individuals within it have had a far different experience. (WSJ)

JD Vance is a sign of Wall Street’s waning power. With his name on Trump’s ticket, tech executives look set to exert more influence on the campaign than financial mega-donors. Silicon Valley titans and tech billionaires including Elon Musk have already cheered on the choice. (WSJ)

Rapid-fire:

• Biden has stepped down from his reelection bid, but some lawmakers want him to leave the White House immediately (CNBC)

• Stocks in energy, financials, and industrial sectors are rallying as if Trump has already won the election (Barron’s)

• Half of the biggest banks have sub-par operational risk management (Bloomberg)

• Ether ETFs are on the way — and analysts are split on how the new products will impact the price of the underlying crypto (Business Insider)

• The next GDP print is due on Thursday, and economists expect it to show 1.9% annualized growth for the second quarter (Investopedia)

Last thing:

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