Populism/Inequality
The US is ripe for a third major political party, but the two-party system will probably prevail in the 2028 election. The macro context will determine whether the US elects a left-wing populist.
Trump, the Fed, the Russo-China bloc, Venezuela, and France are all seeing developments that imply some contrarian tactical views: Long USD, overweight US versus Europe, overweight Europe versus China, and short oil.
Peru’s April 2026 election will inject political volatility, but fundamentals are strong and we are constructive. Buy gold mining equities and gold on dips to capture the supportive global cycle and wait for a more attractive entry point for Peruvian assets.
Trump’s ceasefire talks are positive for Germany – and so was the German election result. But Trump’s tariffs will hit Germany soon. Investors should use near-term volatility to increase exposure to Germany.
The rise of the far-right is challenging mainstream German politics. The CDU/CSU and SPD will govern Germany again after the election. A ceasefire in Ukraine will offer some relief, but Trump’s policies will keep tensions high.
The global political system is destabilizing and the US will turn more hawkish in foreign policy, trade policy, or both, regardless of the election outcome. Tactically go long the dollar.
Our quant model shows Democrats winning the election at a 56% probability, with 303 electoral college votes. But swing state economies are slowing and Democrats’ odds in Michigan fell. Trump can win with Georgia, Michigan, plus one other state. Neither the Fed nor China’s stimulus should reduce one’s odds of a Republican upset.
Democrats will not win a full sweep and implement drastic new tax hikes. However, our quant model still favors them to win the White House and just upgraded their odds. While we expect equity volatility around the election, investors do not need to worry about corporate tax hikes.
