With less than a week till the US election, top investment banks are providing clients with their analysis on what the various election outcomes will mean for investors.
Across the pond, European investors will also be keeping an eye on the results. Both Barclays and UBS have broken down what the US election outcome could mean for European investors providing some key pieces of advice and insight.
The most common theme across both Barclays’ October 21 note and UBS’s October 26 note is that a Democratic sweep would be most beneficial to Europe with policies that would likely reduce trade uncertainty and create stronger ties with the US.
“We expect the outcome of the US election to affect the European economy via two key channels: trade and foreign policy,” said UBS economist, Dean Turner, in the note.
However, Barclays’ equity analyst, Emmanuel Cau highlights that in the long-term elections have had little lasting impact on markets. He believes a convincing win by either candidate would be a “market-positive” in the short-run, noting that value stocks have typically led post-election rallies.
A graph on value stocks outperformance after elections from Barclays research note
A contested election, which still remains a possibility, would present the most market volatility out of the election outcomes, Cau said.
“The contested election of 2000 saw European and US equities fall 10% the following month, bond yields move lower and defensives outperform,” Cau said.
Whereas a divided government with President Donald Trump returning to the White House and a divided Capitol Hill could mean a return to the status quo and modest policy shifts, Turner said.
“A fiscal package to support the economy would still emerge, but it is likely to be smaller than under a Blue Wave,” Turner said. “Renewed trade tensions with China could emerge and Europe is likely to remain in the crosshairs for the trade hawks.”
Here’s the 6 pieces of advice for European investors from Barclays and UBS: