Here's how to navigate the US election year amid a potential Biden-Trump rematch - UBS

In a note to clients this week, analysts at UBS provided their thoughts on how investors can navigate the US election year amid a potential rematch between Biden and Trump.

The investment bank stated that "nine months is a long time in politics," and political fortunes can shift appreciably over the course of a long presidential campaign, especially as American voters are "subjected to incessant media coverage and repetitive advertising."

"National polls should be treated with skepticism, with closely contested 'swing states' holding relatively more importance in the general election," added the firm. "It is also worth noting that public opinion can change substantially in the runup to Election Day, so national polls in February are unlikely to offer much clarity about the outcome."

UBS also said investors should be aware that contentious election campaigns do not trigger an equity market correction. They note that while fiscal and regulatory policies can affect the performance of specific asset classes in the short run, longer-term portfolio management decisions should be treated as an apolitical exercise.

When it comes to international trade and the federal deficit, these are likely to come under the spotlight, said UBS, with global trade relationships front and center in the next administration.

Overall, UBS stressed the importance of a diversified and balanced portfolio ahead of the election.

"Against the current backdrop of lower inflation and likely slower but positive growth, we recommend investors seek quality in both bonds and equities," said the bank. "We also see opportunities in small-cap stocks, which would likely outperform in a Goldilocks scenario."

By Sam Boughedda

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