Since the pandemic and all that followed in its wake it seems as if we should be getting accustomed to everything but business as usual, yet fate still has a funny way of pushing the boundaries of credibility.

Like an increasingly untenable plot line in a television soap, Joe Biden said on Sunday that he would not stand as the Democratic candidate in the US election on November 4, making him the first incumbent president to withdraw since Lyndon Johnson in 1968. The announcement came just eight days after the assassination attempt on his Republican opponent Donald Trump.

With the noise from the UK election now in the rearview mirror, businesses here are hoping for a period of relative stability to consolidate their continuing recovery from surging prices and labour shortages triggered by the combination of Brexit and Covid. But as illustrated most recently by the pandemic and the global banking crisis before it, events abroad can and often will reverberate globally.

It's difficult to say at this point exactly what a Trump victory – or that of Biden’s mooted successor, vice president Kamala Harris – would mean for the US economy, never mind business here in Scotland. But following the latest plot twist in this exceedingly turbulent US election, there is plenty of speculation from the pundits.

One popular line of discussion among investors in US equities is whether to continue betting on the so-called “Trump Trade” which had been gaining momentum since the car crash presidential election debate that aired on CNN in June.

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The term refers to the flow of investment into industries set to benefit from Trump’s looser fiscal policies, deregulation, higher tariffs and infrastructure spending. As the odds shortened on a Republican sweep across both houses of the US Congress – paving the way for a second Trump administration to implement its policies unfettered – sectors such as energy companies, banks and bitcoin came into favour at the expense of renewables and electric vehicles.

There was a slight unwinding of some of those Trump Trades yesterday as it was judged that Biden’s decision to step down has somewhat increased the Democrat’s chances of victory. US firms that generate a high proportion of their income in other parts of the world outperformed those rely on domestic sales, reversing a recent trend encouraged by the belief among investors that Republicans will pursue an “America first” policy.

While the presidential race still looks like Trump’s to lose, a less one-sided affair in terms of taking control of both the Senate and House of Representatives will be welcomed by many.

A large number of economists have predicted that Trump’s policies will make America’s inflation problem worse, and will balloon the US deficit. As his fortunes appeared to advance in recent weeks, US Treasury prices fell and yields rose, which they often do in anticipation of higher inflation.

“The market’s knee-jerk reduction in term premia by way of yield curve flattening makes sense to us,” said Aaron Rock, head of nominal rates at investment company Abrdn. “In the short term, the prospect of credible competition against President Trump will ease markets’ growing concerns of a Republican sweep.

READ MORE: How Democrats have responded to Biden's decision to step aside

“A less one-sided race should temper fears of an inflationary second Trump term centred on significant tariffs and tax cuts. This has rightly taken some of the heat out of US yield curve steepening, particularly at the long end.”

Coupled with the prospect of rate cuts, the ongoing political uncertainty provided support for gold prices which opened slightly higher yesterday morning in an attempt to rebound from a three-day correction following an all-time peak last week. Gold benefitted from a weaker dollar that fell in response to Biden’s decision to exit the race, prompting investors to bullion as a hedge against the uncertain outlook.

Oil prices remained in negative territory as analysts warned that Biden’s exit could influence oil production and regulation in the US, with Harris seen as being potentially tougher on the industry. This would have implications for supply levels in crude markets.

For all the criticism of Biden, it’s worth noting that he has overseen the fastest Covid recovery of all the G7 nations. Fears of trade wars and instability under a Trump administration could result in UK companies proceeding more cautiously by delaying their plans for 2025 until the election results are in.

READ MORE: US Democrats face Hunger Games-type battle to choose new leader

Until the votes are counted, interest rate cuts will be the key driving force in both US and UK equity markets.

Financial markets are currently betting that the US Federal Reserve will reduce the cost of borrowing with rates cuts in September, November and December. The UK’s Bank of England is set to make its next announcement on interest rates on August 1, with the odds of a cut now hovering around 35%.

In the meantime, the US political show will keep on rolling in what is expected to remain chaotic fashion.

“It has been suggested this year’s presidential race could now resume a more traditional debate centred on policies rather than fitness for office,” said Mr Rock at Abrdn. “We are not convinced. For starters Trump is now likely to have the tables turned and face his own accusations of being too old for the presidency.

“In any case, a somewhat less self-assured Trump may well increase his campaign’s intensity, with contentious headlines and attacks on character inevitable. Add to this a recent softening in the inflation and labour market data implying interest rate cuts before November.

“One thing appears certain, market volatility will remain high.”