Jakarta, (SEMISLOT88) Indonesia – The decline of the President of the United States (US) Joe Biden in the political contestation of the US presidential election in November 2024 will shock the market.
Previously, Joe Biden decided to withdraw from his candidacy campaign for a second term. He expressed this in a letter uploaded to his personal Instagram and X accounts.
In his letter, Biden expressed his gratitude to Vice President Kamala Harris and all the supporters who have worked hard for his election campaign.
He also expressed confidence that America will continue to move forward and face challenges with unity and cooperation.
“While it is my intention to seek re-election, I believe it is best for my party and this country if I step down and focus fully on carrying out my duties as President for the remainder of my term,” Biden wrote in his letter on Sunday (21/7/ 2024) local time.
Biden has caved to relentless pressure from his closest Democratic allies who continue to urge the 81-year-old to withdraw from the race amid deep concerns that he is too old and weak to defeat former President Donald J. Trump.
Vice President Kamala Harris is now seen as the frontrunner to replace Biden in the 2024 presidential election. The party itself will announce a new candidate at their convention in Chicago on August 19-22.
Since Biden’s poor debate performance last June, many market analysts see a high probability that Trump will win the 2024 US Presidential Election which will be held next November.
In fact, the shooting case that hit Trump while campaigning in Pennsylvania, Saturday two weeks ago, made the market even more confident that Trump could beat Biden in the 2024 presidential election.
A survey from Polymarket shows Trump ahead with 63% while Harris is only 32%.
Jay Hatfield, CEO at Infrastructure Capital Advisors, said he expected a “subdued stock market reaction” to Biden’s withdrawal from the US presidential race, as expected in large part as calls for Biden to step down grow louder.
Economists at Swiss bank UBS said that if Harris wins, the Democratic administration will likely continue to support initiatives that benefit green energy, efficiency and electric vehicle makers.
On the other hand, if Republican rival Donald Trump wins, the White House will likely raise market expectations for tax cuts and lighter business regulations, while raising concerns about higher trade tariffs.
Impact of Biden Resigning to RI
Bank Danamon economist Hosianna Situmorang explained that Biden’s resignation could increase uncertainty regarding the direction of trade and other investment policies in the US and around the world.
“This condition increases volatility in the money market and capital market, one indication is that the Volatility Index (VIX) is rising again,” said Hosianna to CNBC Indonesia.
For your information, at the start of trading yesterday (22/7/2024), the VIX was at a fairly high level, namely above 16.
Especially in Indonesia, uncertainty will also be great because of the transition period for the new president from Joko Widodo to Prabowo Subianto.
“In the midst of global uncertainty regarding the US and Euro Area Elections, domestically we are still preparing for the transition of the New President and Regional Elections,” he said.
Uncertainty can trigger investors to choose safe assets and sell other assets, such as the rupiah. This condition could put pressure on the rupiah against the US dollar.
“All of these things make investors and market players choose safe assets, one of which is USD so that the rupiah is still volatile and tends to weaken,” he added. Hosianna also emphasized that the weakening of the rupiah that occurred was more short term because it was in anticipation of the US central bank’s interest rate cut ( the Fed).
Meanwhile, Mirae Asset Sekuritas economist Rully Wisnubroto said that Biden’s decline and the advancement of Kamala Harris have not yet seen a significant impact, Trump still seems to be the favorite for the time being.
“Currently, if Kamala is running, she has a better chance than Biden, who already looks too old and unfit to be President again,” said Rully.
Rully also said an interesting thing that if Trump wins the presidential election this time, the market will think that this will not be a surprise. This was different in 2016, when Trump was able to beat Hillary Clinton, which was considered to be a surprise for the market.
Meanwhile, Chief Economist at Bank Permata, Josua Pardede, said that the weakening of the rupiah was due to the risk-off sentiment that emerged globally after Joe Biden suddenly announced that he would not continue his candidacy for president in the 2024 election.
Not only news from the US, the cut in the benchmark interest rate by China’s central bank (PBoC) by 10 basis points (bps) for one and five year tenors is considered capable of alleviating investors’ concerns about delays in China’s economic recovery.
These two things are considered capable of weakening the rupiah, especially in yesterday’s trading (22/7/2024).
Even though the rupiah has tended to be under pressure in recent times, Josua believes that global investors will pay more attention to the direction of global central bank interest rates, especially the Fed, which is expected to have greater room for reduction in 2025. And in general, in the midst of a reduction in the Fed interest rate which will also be followed by a reduction in the BI benchmark interest rate, there are expectations of a weakening US dollar which has implications for the potential for strengthening financial asset prices in developing countries, including Indonesia.
