Investing.com -- As the U.S. presidential election draws closer, UBS analysts believe investors should stay the course, emphasizing that market uncertainty is unlikely to derail positive equity fundamentals.
Despite the potential for increased volatility in the coming weeks, UBS suggests that making dramatic portfolio changes based on election outcomes could be counterproductive.
"Reducing equity exposure in the wake of what investors might consider a 'disappointing' election outcome is likely to be counterproductive over the longer term," UBS noted.
They explain that historical data supports this view, as U.S. equities tend to perform well both leading up to and following presidential elections, with gains documented since 1928.
The S&P 500 has demonstrated strong momentum, recently closing at 5,854 and nearing its 47th all-time high of the year.
UBS said the market’s six-week winning streak reflected steady economic growth, with companies representing 15% of the S&P 500’s market cap having reported Q3 earnings so far—80% of which beat earnings estimates and over 60% exceeding sales expectations.
UBS analysts remain optimistic about the broader economic outlook, pointing to strong consumer spending, bank confidence, and sustained demand for artificial intelligence technologies.
With the Federal Reserve expected to continue cutting interest rates, UBS forecasts S&P 500 earnings growth of 11% in 2024 and 8% in 2025.
Although policy changes following the election could influence market behavior, UBS stresses the importance of evaluating them in context.
"The potential knee-jerk market reaction to a Donald Trump victory could be positive," the note explained, as risks of higher taxes and regulation would diminish. However, tariff and deficit concerns could temper any initial rally.
Ultimately, UBS sees election uncertainty as part of the market’s normal course and encourages investors to maintain their positions, focusing on long-term fundamentals rather than political outcomes.