UBS: ready to ride the election roller coaster?

Fx168 financial news (North America) for a long time, stock market strategists have been providing advice to clients on how to invest before the US presidential election. Thomas McLoughlin, head of UBS’s U.S. fixed income division, said Monday (August 17) that U.S. President Donald Trump faces a lot of resistance in his bid for re-election. His opinion polls have been lower than that of presidential candidate Joe Biden. As the epidemic continues to engulf the United States, the trump administration’s support rating continues to decline. Even Trump’s favorite topic of boasting, the U.S. economy, has fallen into recession. These obstacles may prompt trump to take various actions to challenge Biden’s victory. If election day passes and there is no clear winner, investors should be prepared for the market to move to more stable assets, the bank added. < / P > < p > he wrote: “given that President trump is recovering his lost ground and the election is nearing the end, there is a real possibility of delaying the announcement of the winner.” “The market is averse to uncertainty, so there is reason to expect safe havens such as gold and US government bonds to provide some shelter for investors,” he continued UBS believes that the best precedent for judging market reaction is the presidential election in 2000. At that time, the two main candidates were George Bush, governor of Texas and Republican candidate, and Albert Arnold Gore, then vice president and candidate of the United States. The final election results were finally decided after 36 days of controversy. The main focus of the dispute was the election results of Florida, where the two sides had unusually close votes. The controversy over the recount and the Supreme Court’s decision kept Vice President Gore from making concessions for six weeks after election day. In the end, Gore said that despite his strong dissatisfaction with the court’s judgment, “for the sake of the unity of our people and the strength of democracy, I will make concessions” and accept the relevant ruling. < / P > < p > the stock market began to decline under this unprecedented result. In the first two weeks after the US election, the Dow Jones Industrial Average fell more than 5%. Gold prices soared as investors poured into safe haven assets. UBS, on the other hand, said academic research conducted after the 2000 election showed that stock market volatility associated with the fruitless election would be concentrated in the first four days after the controversial election results were released. < / P > < p > McLoughlin added that delaying the decision would not make the market volatile for too long. Volatility “should disappear over time” after the initial peak. Once the market reaction is calm and investors withdraw from the short-term strategy, the potential boost of safe haven assets will also fade. Mark grant, chief global fixed income strategist at wealth management firm B. Riley FBR, also said on Tuesday: “frankly, the biggest concern in the market is elections.” In his view, there is a “clear difference” between the tax proposal and trump’s. “People are proposing higher taxes on people, higher taxes on capital gains, which is the opposite of President Trump’s proposal,” Grant said “I’ll get some protection in this election,” he said, advising institutions and investors to have more cash than usual to prepare for the election. He suggested that investors should be “short” and buy short exchange traded funds (ETFs) and put options. < / P > < p > he believes the stock market will “continue to rise from now on.”. Today, the S & P 500 closed at an all-time high of 3389.78, surpassing the record high of 3386.15 set on February 19, erasing the historic plunge in February and March, up about 5% this year. Grant said the volatility in the stock market was due to the influx of investors into more promising stock markets without any return on bonds. < / P > < p > he added: “the fundamentals of the market, unemployment, production and manufacturing are much better than many people think, which also provides a support for our current situation.”