President Joe Biden exited from the 2024 presidential race on Sunday, throwing his support behind Vice President Kamala Harris to be the Democratic nominee. WisdomTree Global CIO Jeremy Schwartz joins Market Domination to discuss how markets (^DJI, ^IXIC, ^GSPC) are reacting to the news and how it may affect the small-cap rally (^RUT).
"The markets always don’t like uncertainty. We got a little bit of clarity of what the nominees are going to be like," Schwartz says. He adds that markets have a preference for divided House-Senate races and candidates who run on lower taxes.
"Some of the odds for Trump has been the leader for a while. But the odds of the Democrats taking the House have actually gone up with this change," he notes of the current market action.
Schwartz highlights that a cool Consumer Price Index (CPI) print in June led to some rotation away from Big Tech toward small caps: "They’re the ones who pay the highest taxes. So they’re also looking forward to tax policy next year."
With an interest rate cut likely to come in September, he argues that for the small-cap rally to be sustainable, there will have to be continued broader participation that shows up in earnings.
As the election inches closer, Schwartz reiterates that "there’s a lot of noise that comes with these elections, a lot of uncertainty that comes with it. But stocks have been a very good way to accumulate long-term wealth… the elections are going to generate a lot of headlines for the next 100-plus days, but you got to zoom back out to focus on the broad equity markets. We think that’s where you want to be over the long run."
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