When the conversation turns to politics and the markets this holiday season

Mike Ryan's holiday cheat sheet

by Chief Investment Officer, Americas Michael Ryan 26 Nov 2019

For the past several years I‘ve put together pre-Thanksgiving “cheat sheets” to prepare myself for the sorts of questions that family members typically throw my way over dinner. I’ve done this because the topics that dominated our small talk at family gatherings (politics, sports, weather) have become either too polarizing or too depressing for most of us to stomach over a large holiday dinner.

Meanwhile, the accomplishments of our children have already been so thoroughly blasted out through a multitude of social media channels (accompanied, of course, by the appropriate emojis and a trove of photos) that there isn’t much fresh ground to cover there either.

To make sure I can hold my ground when the conversation inevitably steers toward “the market,” I’ve prepared the following key discussion points. Hopefully you will also be able to turn to these if a lull develops in your own holiday conversations and you find yourself put on the spot.

Will the President get impeached, and how will markets react?

The head of our US Office of Public Policy (John Savercool) believes that impeachment is a virtual certainty. It’s doubtful that Speaker Nancy Pelosi would have allowed investigations and hearings to progress this far unless she was confident that a Democrat majority House would deliver articles of impeachment. However, unless something new and far more damaging emerges from these hearings, it’s unlikely that enough Republicans in the Senate would break ranks to muster the two-thirds majority necessary to remove the President from office. And history suggests that if we get impeachment without removal from office, then markets are likely to look past the political discord.

Will the US and China reach a trade deal?

It’s pretty clear that the sort of “grand bargain” that some had hoped for to end the trade dispute between the US and China is simply out of reach—and that’s probably a good thing. Because trying to address the myriad issues related to the complex and contentious US-China relationship would take years. Instead, by breaking down the trade negotiations into more manageable steps or “phases,” there is a better chance to develop a framework for a gradual “de-escalation.” With much at stake and a more modest scope, the odds of reaching a phase 1 agreement prior to year-end are fairly high.

Who will win the 2020 Presidential election and how should I position for the outcome?

This is shaping up as perhaps the most polarizing election in memory as both parties chart out starkly different policy paths. It is far too early to begin handicapping the outcome of the election—let alone re-position portfolios based solely on political rhetoric. Much of what is said during the campaign fails to make it into a policy agenda or survive the legislative gauntlet unless one party is able to control both the executive and legislative branches and command a super-majority in the Senate. That said, care should be taken to ensure that portfolios are not overly exposed to sectors likely to fall into the political crosshairs. These include energy, healthcare, financial services and technology.

Who do I intend to vote for in 2020?

This is about the time I turn the conversation back to the accomplishments of my kids, the excellence of my wife’s cooking skills, the likelihood of a brutally cold winter ... and, of course, the prospects for the Mets making it to the World Series.

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