US equities remain attractive as victory looms for either Kamala Harris or Donald Trump in next month’s presidential election.
A Harris win with a divided congress sat as the most probable outcome in the November 5 election with a 45% chance, UBS said on Tuesday, as a Trump victory and red sweep appeared as a 35% probability.
The former scenario would have a limited impact on US equities, according to the bank, while a Trump win was expected to prompt a positive market reaction initially.
“More favorable tax and regulatory expectations” should emerge under Trump, but “longer-term tariff and trade war concerns could lead to volatility,” UBS said.
The communications services, consumer discretionary and information technology sectors were seen as being negatively impacted as a result of a Trump win, while a victory for Harris would have a limited effect on each.
Further drug price regulation under Harris would negatively affect healthcare firms, while these were seen as benefiting from a Trump win.
Utilities, industrial firms, and consumer staples were then seen facing a limited impact under each scenario, alongside the energy sector despite likely deregulation for fossil fuels under Trump.
Victory for Trump would spell good news for the materials and financial sector, with real estate firms likely facing mixed fortunes due to lower taxes but higher interest rates.
“The fiscal impact of a Harris presidency under a divided government appears mixed,” UBS said, “meanwhile, the fiscal impact of a red sweep is not obviously stimulative and could even prove contractionary if imposed tariffs are high and wide-reaching”.
Both gold and oil were also labelled as attractive ahead of the election, while the US dollar was dubbed unattractive, with neither scenario seen altering the greenback’s long-term weaker outlook.
“The next US president should inherit an economy with firming activity and declining inflation, although price levels remain uncomfortably high for many Americans,” analysts added.
“From this starting point, several important legislative and executive actions could have a bearing on the direction of the economy and the fiscal outlook over the next administration.”