The upcoming U.S. election is expected to have significant implications for the financial markets. The contest between Donald Trump and Kamala Harris could influence U.S. equities, the dollar, and overall economic health.

Scenarios Following the Election

UBS Asset Management has outlined four potential scenarios following the election:

• Red Wave: Republicans sweep, leading to increased fiscal expansion and tax cuts. This could boost U.S. equities, but higher tariffs may create trade uncertainties that could negatively affect international equities.
• Trump Victory with Divided Congress: Tax cuts would be hampered, but regulatory agenda advancements could benefit risk assets.
• Harris Victory with Divided Congress: This could lead to a correction in equity prices and a relief rally for international equities.
• Blue Wave: A clear victory for Harris would result in a larger deficit, increased spending, and higher taxes. U.S. equities may face challenges, but international markets could benefit from reduced trade risks.

Market participants will closely monitor these scenarios and their potential impacts on the financial landscape, including fiscal policy, trade dynamics, and regulatory changes.

Overall Environment and Historical Trends

Despite the complexities, the overall environment remains positive for risk assets, with historical trends suggesting that equities tend to rise through the end of the year, regardless of the election outcome.