UBS AM: 2020 US election & markets, it's complicated

The Macro Monthly of UBS Asset Management takes a closer look at how investors are likely to react to the uncertain political environment in the run-up to US presidential election in November 2020. 

Some highlights:

• The path to the US presidential election is likely to drive market volatility higher throughout 2020, potentially starting as soon as the February 3rd Iowa caucuses.
• Leading Democratic candidate platforms, as they currently stand, call for higher corporate and wealth taxes, along with meaningful increases in regulation. While these platforms are equity market-unfriendly, the degree of policy change depends on whether the Democrats are able to gain control of the Senate in addition to the presidency.
• Policy uncertainty may weigh on US animal spirits and specifically capital investment in 2020, just as US fiscal stimulus is wearing off.
• UBS AM prefers ex-US equity markets in 2020 given the cheaper valuations and a greater exposure to global manufacturing as the trade war de-escalates. US tax and regulatory uncertainty provides yet another reason to underweigh US equities and the US dollar.

The entire Macro Monthly can be found here.