US midterms point to volatility, then investment opportunities
US midterms point to volatility, then investment opportunities
Dr. Luca Bindelli
Head of Investment Strategy
key takeaways.
- Election-related volatility may rise temporarily, but reduced legislative uncertainty should ultimately support risk assets
- A modest fiscal drag in 2027 and reduced policy uncertainty could ease pressure on long-term yields, supporting fixed income
- Post-election relief could also support equities, although earnings, margins and the trajectory of interest rates will remain more important
- Narrower yield differentials could weigh on the dollar, although stronger institutional checks may support it against low-yielding currencies. Gold remains a useful diversifier in portfolios.
We examine how US midterm elections, and our base scenario of a divided government post-midterms, has historically affected equities, bonds, the dollar and gold.
Government bonds tend to benefit
Political relief helps but earnings remain key
Neutral dollar, marginally stronger gold
Stay invested and favour equities
CIO Office Viewpoint
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