US equities are expected to perform well regardless of the outcome of the upcoming presidential election, according to analysts from UBS.
Analysts from UBS have assigned a 45% probability to a Kamala Harris win in a divided Congress and a 35% likelihood of a Donald Trump victory with a Republican sweep. Under a Harris administration, minimal impact on US equities is predicted, while a Trump win is expected to initially elicit a positive reaction from investors. However, concerns about potential tariffs and trade wars could introduce volatility into the market.
Specific sectors may be affected differently depending on the election outcome. The communications services, consumer discretionary, and information technology sectors may face challenges under a Trump win, while a Harris presidency is not anticipated to have a significant effect on these sectors. The healthcare industry may experience adverse consequences under a Harris administration due to increased drug price regulation, while healthcare firms could benefit from a Trump victory. Utilities, industrial firms, and consumer staples are expected to encounter minimal impact regardless of the election outcome. The energy sector is likely to see deregulation for fossil fuels under a Trump presidency but is also predicted to remain stable. The materials and financial sectors could thrive under a Trump victory, while real estate firms may face mixed results.
The fiscal implications of a Harris presidency under a divided government are mixed, while a Republican sweep could have a contractionary fiscal impact. Gold and oil are identified as attractive investment options leading up to the election, while the US dollar is viewed as less favorable. The long-term outlook for the US dollar remains weak regardless of the election outcome. The next president will inherit an economy characterized by firming activity and declining inflation, with critical legislative and executive actions that could significantly influence the fiscal outlook and overall economic direction. Market participants are closely monitoring the evolving political landscape as the outcomes will have far-reaching implications for various sectors and the broader economy.