Markets on alert for Biden exit as Trump-win trades mount

The red-hot Washington debate over whether U.S. President Joe Biden will scrap his run for re-election is spilling into Wall Street, where traders are shifting money to and from the U.S. dollar, Treasuries and other assets that would be impacted by Donald Trump’s return to office.

The recalibration of portfolios kicked off at the end of last week after Biden’s disastrous debate with Trump heightened concerns the 81-year-old Democrat is too old to serve another term. The trading action afterward was most acute in the bond market, where yields on benchmark 10-year Treasuries jumped as much as 20 basis points across the following days.

With speculation now mounting rapidly that Biden could drop out of the race — betting markets see less than a 50 per cent chance he remains a candidate — investors are hastily making contingency plans to react to such an announcement during Thursday’s Fourth of July holiday and the subsequent weekend.

One fund manager, speaking on condition of anonymity given the sensitivity of the topic, said he was heading into the vacation stretch biased toward the dollar and short-term debt as hedges against the spike in risk he reckoned would be sparked by a Biden withdrawal. No president has opted against seeking a second term since Lyndon Johnson in 1968 and the election is just four months away.