Reported about 1 year ago
Mark Haefele, the global chief investment officer at UBS Wealth Management, discussed the potential market volatility that may arise from the upcoming US election in November. He advised investors to manage the related risks through structured investments. As the second half of the year approaches, factors such as the Federal Reserve, voters, and investors are heading towards crucial times. Various significant events will impact the investment landscape, including the election of the next US president, the continued rapid development of artificial intelligence (AI), and an expected rate cut by the Fed. Investors are closely watching how these events will shape the trends for 2025, including the implications of rate cuts, the substantiated basis for AI investments, and the impact of the next US government's policies on the economy and markets. With the second half of 2024 expected to bring both changes and volatility, investors need to remain vigilant and flexible to navigate the evolving investment landscape. Amid a mix of economic, political, central bank, and technological factors, the market will present risks as well as opportunities. The forthcoming US presidential election could intensify market fluctuations. The VIX futures curve sharply rose around November, indicating an anticipation of increased market volatility around the election dates. Survey results from June 18 showed a slight lead for former president Trump over current president Biden, signifying significant undecided voters who could influence the election outcome. However, the direction of the election remains highly uncertain, making it premature to determine the most likely scenario. Investors are advised to avoid making investment decisions based on political preferences and should not delay beneficial investment decisions due to political concerns. Individual political preferences could impact objective judgment, with research supporting the notion that political bias directly influences optimism about future economic trends. Matching investors might deem financial assets undervalued and increase stock holdings, while disappointed investors tend to adopt hedging strategies. This partisan inclination could have a significant effect on returns and market conditions. After Trump's election in 2016, individual asset performances varied. Although the assets affected in this election may differ, heightened market volatility is anticipated. Therefore, scrutinizing potential risks faced by wealth and managing them accordingly is imperative. Defensive structured investments are recommended, as investors should consider managing their exposure to US non-essential consumer goods and renewable energy sectors which could be impacted in the scenario of a 'Red Wave' (Republican sweep). Non-essential consumer goods already face challenges such as weakened commodity consumption, while renewable energy stocks have shown robust performance due to positive AI demand sentiment. Despite potential regulatory loosening under a 'Red Wave,' US financial stocks are yet to consider such a scenario. Various stocks have been identified across sectors that may be influenced by the victory of either Trump or Biden. Investors can adopt strategies to enhance returns or provide capital protection for affected stocks or cyclical stocks in energy, industrial, and financial sectors to manage potential volatility resulting from the election outcome. On the forex front, investors are advised to consider hedging the Renminbi and managing positions in the Mexican peso by going long on the US dollar/Hong Kong dollar through one or two-year forward contracts, given the unchanged linked exchange rate system.
Source: YAHOO