With Joe Biden stepping down and endorsing Kamala Harris as the Democratic nominee, the race for the White House has shifted. Latest polls by the Financial Times show that the current vice president and Donald Trump are in a neck-to-neck race for the US presidency, and market observers agree that the odds of the Democrats retaining the White House have changed.

“Given that we were looking at potentially severe Democratic losses as of last week with Biden on top of the ticket, the chances of a Trump presidency – and a Republican sweep of Washington – have declined,” opines Libby Cantrill, head of US public policy at PIMCO.

But what does a potential Harris win mean for markets?

“As the continuity candidate, Kamala Harris represents less uncertainty and likely less volatility,” said Columbia Threadneedles’s Chief Economist for EMEA, Steven Bell. “Were she to gain the White House, the market would price out the radical program that it had anticipated under a Trump presidency.”

“Risk assets might perform better under a Harris presidency if the Senate or the House were under Republican control as that would keep taxes down,” Bell added. “The races for both the House and the Senate are, like the presidency itself, too close to call. But they are not independent and if Harris were to establish a reasonable lead over Trump, most observers would assume that a clean sweep for the Democrats was more likely.”

“From a market perspective, our US equity strategist believes that Trump may favor equities, while Harris could support bonds. In the former case, oil services and big banks, dominant sectors in the small-cap space, could rally if Trump wins. Overall, the small-cap segment is likely to benefit most from the former US president’s election victory,” wrote DWS CIO Bjoern Jesch in his daily newsletter on Tuesday.

However, markets do not care much about elections, opines PIMCO. “Markets don’t care much at all about the daily micro-dramas of a political campaign, not even when it’s an unprecedented drama involving a late decision by one candidate not to run,” said Michael Townsend, political analyst at Charles Schwab, in a podcast.

“Over the next weeks until Election Day, the markets will have moves in all sorts of directions. But almost all of those moves will be the result of earnings announcements, economic data, and the Federal Reserve’s decisions and timing on interest rate cuts. That’s what the market is really focused on,” he added.