Soft recovery

UBS Investor sentiment

22 Jul 2020

Signs of recovery are tempered by concerns about the election.

The latest UBS Investor Sentiment survey finds that 41% of investors are optimistic about the economy in the short term (next 12 months), a significant rise from the 30% who felt this way in the first three months of the year. As for the long term, investor confidence remains high, with three-quarters of respondents expressing a positive outlook for the next decade.

With this optimism comes an appetite to invest. More than a quarter of investors surveyed say they plan to invest more in the next six months.

However, politics are top of mind for most, with the political environment the top concern, ahead of even COVID-19. The economy, the nation's emergency response capabilities and healthcare are major election issues for investors. While most investors prefer Trump for the economy, most have more confidence in Joe Biden for emergency management and healthcare.

As for positioning, just over a quarter of investors say they will increase cash holdings should Biden win the election, while the same percentage of investors say they will increase stock holdings if Trump is reelected.

Business owners

Despite business owners being hard hit by the pandemic, optimism in the business community has rebounded. 69% feel positive in Q2, higher than in Q1 and approaching the level of optimism seen at the end of 2019. 58% of business owners say they had received financial support from the government and four out of five said that the support had been very helpful. One-third of business owners are looking to hire more but a majority say weathering another lockdown is their biggest worry.

Rise above the rhetoric

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How to navigate the US election

As the US presidential race enters its final months, the UBS Chief Investment Office recommends investors consider the implications the outcome could have on their portfolios. A decisive swing to either party would impact a range of sectors, from energy and finance to technology and healthcare. We have developed three election equity baskets to help investors navigate the contest.

A Blue Wave

The Democratic Party takes both the presidency and wins a majority in Congress. 

In this scenario, we would see outperformance by stocks exposed to energy efficiency, smart mobility and renewables as President Biden adopts a green agenda. We also highlight companies that are more insulated from an increase in corporate taxes and those that could benefit if trade tensions cool. Within healthcare, we focus on companies that could benefit from an expansion of healthcare coverage.

A Red Wave

The Republican Party takes both the presidency and wins a majority in Congress. 

For this outcome, we would see select energy and financial companies benefiting from a “relief rally” since tighter regulations from a possible Biden administration are avoided. The Trump administration has also been supportive of further developments in space technologies, so we would expect businesses related to this sector to benefit. Within healthcare, our selections are focused on managed care companies, which also avoid the risk of changes in healthcare coverage from a potential Biden victory. We also highlight defense companies that should enjoy a more supportive backdrop in a second Trump term. The US dollar could also strengthen temporarily in the event of a Red Wave, as it did during the first Trump term. Faster growth and modestly higher interest rates should attract foreign capital flows into the US, offsetting concerns about larger deficits.

Campaign Warriors

Many investors may prefer to keep politics out of their portfolios.

They're instead choosing stocks that are relatively insulated from campaign issues. For investors looking to maintain equity exposure without adding significant policy or headline risk, we have put together a list of companies that lack significant exposure to the potential major policy changes at issue in the campaign. These include: companies in communication services; companies with adverse revenue stream or diversified content; consumer staples; and portions of the IT sector that have remained out of the regulatory spotlight. 


Let’s make sure you’re prepared for what’s next.

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About the survey

UBS surveyed 902 investors and 500 business owners in the US with at least $1M in investable assets (for investors) or at least $1M in annual revenue and at least one employee other than themselves (for business owners), from June 23 – July 13, 2020. For the 1Q20 results, UBS surveyed 908 investors and 505 business owners in the US with at least $1M in investable assets (for investors) or at least $1M in annual revenue and at least one employee other than themselves (for business owners), from April 1 - 20, 2020. For the 4Q19 results, UBS surveyed 915 investors and 500 business owners (with at least $250k in annual revenue) in the US, from December 26, 2019 - January 7, 2020. For the 3Q19 results, UBS surveyed 905 investors and 506 business owners (with at least $250k in annual revenue) in the US, from September 27 - October 8, 2019.