organic shaped structure

We expect politics to play an outsized role in 2024. The US presidential election, the ongoing Israel-Hamas and Russia-Ukraine wars, and the rivalry between the US and China could all affect markets globally. Investors should prepare for bouts of politically driven volatility and consider hedges.

US presidential election

Sizing the odds. President Joe Biden and former President Donald Trump currently hold significant leads in their quest for the nomination from their respective political parties.

Betting markets ascribe a 70% chance of Biden becoming the Democratic nominee—an unusually small number for an incumbent seeking reelection. Meanwhile, although Trump has an 80% chance of securing the Republican nomination according to betting markets, legal obstacles could undermine his appeal to unaffiliated voters and reduce his chances of securing the presidency—the markets are putting this probability at 35% (and Biden at just 30%). An outside risk is that this dissatisfaction could lead to third-party candidates tipping the election or even preventing a candidate from winning the majority of the Electoral College votes, throwing the election decision to the House of Representatives.

A divided Congress is likely. We think a divided Congress is the most likely scenario after the elections in 2024. We expect the Republicans to assume control of the Senate because they have fewer seats to defend. However, we believe the Democrats have a higher chance of retaking control of the House, with some Republicans facing tough reelection campaigns in the aftermath of the ousting of former Speaker Kevin McCarthy.

A divided Congress would mean that legislation would need to be passed on a bipartisan basis. This would reduce the likelihood of sweeping domestic reforms—such as changes to tax or health policy, or a rollback of climate spending—being introduced, but the sitting president would retain discretion on foreign policy, including areas like trade relations with China and the US’s stance with respect to the Russia-Ukraine and Israel-Hamas wars.

Israel-Hamas war

Amid a growing humanitarian crisis, the Israel-Hamas war remains highly fluid. At the time of writing, the conflict remains a contained confrontation confined to Hamas and Israel in the geographical areas under their control. The risks, however, appear tilted toward the downside case of a regional escalation that draws in other nations. Israeli ground operations in Gaza, and exchanges of fire between Israel and Hezbollah and other Iranian proxies, point to the risk of escalation.

Impact on oil markets. In our base case, we expect Brent to trade in a USD 90–100/bbl range. But if Iranian crude exports fall by around 500,000 barrels per day, this could push oil prices to USD 100–110/bbl. A broadening of the conflict across the region, involving other oil producers, could push oil prices above USD 120/bbl.

Russia-Ukraine war

At the time of writing, the war is having a relatively limited day-to-day impact on global financial markets. That said, the tightening in global oil markets has left the world more vulnerable to other supply shocks.

America first? If Biden were to secure reelection, we would expect a continuation of the status quo in which the US supplies financial and military support to Ukraine. However, if Trump runs on an “America First” platform and is victorious, we would expect US financial and military support for Ukraine to significantly decline. This would leave European governments needing to materially increase spending—a fiscal risk—or accept potential Russian military gains.

US-China rivalry

Trade and tech. US-China trade relations appeared to have found a new uneasy equilibrium in 2023, but China’s efforts to become self-sufficient in semiconductor production are testing this balance. The White House is attempting to block Chinese access to foundational AI chips and chipmaking technology.

Taiwan. While we expect mutual interest in cross-strait and US-Taiwan cooperation to continue, heightened US-China tensions surrounding Taiwan could have material consequences on global supply chains, with second-round impacts on both global markets and diplomatic relations.

Investment implications

In Hedge market risks, we detail some of the primary ways investors can hedge portfolios in 2024, including through capital preservation strategies, oil, gold, and hedge funds.

Lessons from history

Do US presidential elections impact markets?

While the US presidential elections are important for domestic and foreign policy, our research shows that they do not have a reliable impact on markets. We recommend investors express their political preferences at the polls and not with their portfolios.

More key questions

Other chapters

Chapter 2 The Decade Ahead

Dive into the “Five Ds,” scenarios and key questions for the future, and our asset class expectations.

Chapter 3 Top investment ideas

Explore our Messages in Focus to learn about how we think you can add value to your portfolio.

Chapter 4 Getting in balance

Find out how we think investors can protect and grow their wealth for the year and decade ahead.

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This report has been prepared by UBS AG, UBS AG London Branch, UBS Switzerland AG, UBS Financial Services Inc. (UBS FS), UBS AG Singapore Branch, UBS AG Hong Kong Branch, and UBS SuMi TRUST Wealth Management Co., Ltd..