US Election
Republicans are favored in the House and Senate even if they do not win the White House. A Democratic sweep is a 20% risk. The policy implication would be inflationary, but not so much as under a Republican sweep. Election uncertainty should increasingly weigh on cyclical and high-beta assets in the second half of 2024.
Democrats remain slightly favored for the White House because they are the four-year incumbent presidential party and the economy is not in recession. But if the unemployment rate rises in the lead up to November, then Biden and Democrats will become disfavored regardless of Trump’s convictions.
Favor defensive sectors, low-beta assets, and long-duration bonds until the election uncertainty is lifted one way or another over the next five months.
The stock market will suffer a setback from the weakening labor market and a rebound in US and global policy uncertainty.
Investors should prepare for economic data to weaken even as policy uncertainty and geopolitical risk skyrocket ahead of the US election.
Democrats are favored to win the election until recession materializes. But recession risks are high. Investors should adopt a defensive and conservative strategy in 2024 amid extreme US policy uncertainty.
President Biden is facing foreign challenges on three fronts and these challenges are coalescing around the critical states of the Midwest. Take risks off the table and stay defensive in 2024.
The next six-to-nine months hold a crucial test of whether the equity market will ratify the soft landing and the Biden administration or not. If so, then markets will rally on policy continuity and likely gridlock. If not, then markets will struggle until the election is over and again in 2025-26.
The next six-to-nine months hold a crucial test of whether the equity market will ratify the soft landing and the Biden administration or not. If so, then markets will rally on policy continuity and likely gridlock. If not, then markets will struggle until the election is over and again in 2025-26.
In response to the first-ever federal indictment of a former President, investors should focus on the state of the economy and not on Trump’s legal trouble. They should also use the current market rally to stock up on protection, as a recession is still likely, albeit delayed.