As the U.S. presidential election nears, UBS analysts encourage investors to remain steady, noting that while market volatility may increase, it’s unlikely to disrupt long term positive trends in equities.
UBS advises against making drastic portfolio adjustments in response to election results, suggesting such actions could undermine long term growth potential. According to UBS, reducing equity exposure due to an unexpected election outcome may be less effective over time.
Historically, U.S. equities have performed well around election periods, with data showing steady gains since 1928. UBS highlights that the S&P 500 recently closed at 5,854, marking a strong performance with nearly 47 all-time highs this year alone.
The recent six-week rally in the S&P 500, UBS analysts say, reflects a resilient economic environment, with approximately 15% of companies in the index reporting Q3 earnings that have largely exceeded estimates 80% beat earnings expectations, and over 60% surpassed sales projections.
UBS remains optimistic about the broader economy, pointing to robust consumer spending, stable banking sector confidence, and growing demand for artificial intelligence advancements. With the Federal Reserve expected to continue reducing interest rates, UBS anticipates earnings growth for the S&P 500 of 11% in 2024 and 8% in 2025.
While election related policies may influence market activity, UBS recommends evaluating these shifts within the larger economic context. A potential Donald Trump victory, for instance, might prompt a positive initial reaction due to decreased regulatory and tax concerns, though trade and deficit issues could limit long term momentum.
In conclusion, UBS views election related market uncertainty as typical and advises investors to stay focused on enduring economic fundamentals rather than short term political developments.
