The first of three presidential debates was marked by frequent interruptions and personal insults. (ddp)

The event was more spectacle than traditional debate, marked by frequent interruptions, exaggerated claims and allegations, and personal insults. The moderator had little success in enforcing the agreed rules.


Historically, presidential debates have rarely altered the preferences of most voters. We’re inclined to conclude that on the basis of the arguments made by each individual on stage, this debate will prove no exception. Voters in 30 states have already begun to cast their ballots, either in person or by mail, and the debates are only likely to reinforce the antipathy that each candidate’s avid supporters have for the opposing party’s standard-bearer.

President Trump appeared unwilling to accept categorically the results of the election if he loses. He railed against pervasive fraud in the use of mailed ballots and appeared to suggest that the Supreme Court will be obliged to arbitrate the result. His suggestion that he would actively contest this for weeks after the ballots are counted increases the level of uncertainty for market participants and will likely lead to higher volatility as we approach election day.

Current equity market volatility is already elevated, with the VIX trading around 27 compared with its long-term average of less than 20. Forward VIX contracts also show volatility rising further immediately after the election, peaking at around 33 in December. At print, US futures have turned negative, pricing a –0.8% decline at the open.
But while we can expect short-term volatility to continue, over the medium term we maintain a positive outlook on equities. Historical equity performance since 1928 (but excluding 2008) lends support to this view:
  • Negative just for a month. Since 1928, the S&P 500 has typically generated flat returns one month prior to the election date. This in our view is likely due to increased uncertainties heading into the elections holding back performance. However, post-election, S&P 500 returns have typically turned positive and the benchmark has risen on average by 3.9% over the next six months.


  • Who wins matters only for a month before and after the election. When Democrats have occupied the White House, the S&P 500 has fallen around 1% one month prior to the election and remained almost flat for one month post-election. By contrast, a Republican win has seen the S&P 500 up both one month prior (about 1%) and post-election (about 2%). However, three months after the election, average returns have been similar following both a Democratic and a Republican win.


  • A loss by the incumbent is followed by bigger S&P 500 gains. The S&P 500 has lost an average of about 2% one month prior to elections when the incumbent has lost. However, returns turned positive post-election irrespective of whether the incumbent lost or won. Interestingly, returns were higher when the incumbent lost, which could reflect an end to political uncertainties and markets digesting new policies.


Historical analysis suggests investors should look through the near-term turbulence; we recommend taking advantage of volatility to establish long-term positions. Read more here. The UBS US Office of Public Policy sees the most likely election outcome as a blue wave (50%) followed by a Trump win with a divided Congress, i.e., the status quo (35%). We have developed three election equity baskets to help investors navigate the contest. Read more here.

Looking further ahead, we believe that an end to political uncertainty, combined with the passage of further US fiscal stimulus, and sustainable improvements in mobility (based on development of a vaccine) will support the next leg of the equity rally over the medium term. Read more here on positioning for the upside in equities.

Main contributors - Mark Haefele, Sagar Khandelwal, Vincent Heaney, Jon Gordon.

Content is a product of the Chief Investment Office (CIO).

Original report - The first US debate: less clarity,more uncertainty,30 September 2020