Geopolitics
Investors should focus on growth concerns rather than the “Trump trade.” Bond yields will fall in the short run due to cyclically disinflationary economic slowdown, rather than rise in anticipation of a Republican full sweep and inflationary policies, which are likely but not yet a done deal.
As Trump’s victory odds rise, the underperformance of European equities deepens. How negative would a global trade war be for European assets?
Investors should overweight US assets and de-risk their portfolios in anticipation of a major increase in policy uncertainty and geopolitical risk surrounding the US election and its global ramifications.
The real threat to European equities is growth, not political risk. How low will Eurozone earnings fall during the coming recession and how much will equities decline in response?
The cyclical economy is slowing today. Republicans are now more likely to win a full sweep, crack down on immigration and trade, and at least modestly stimulate the economy. Uncertainty and volatility will rise.
