Impact of US Election on European Equities

According to analysts at UBS, the outlook for international trade and green energy policies following the US presidential election may significantly impact European equities.

Many Americans are set to vote on Tuesday in a highly anticipated election, considered one of the closest in modern political history.

Candidates' Final Campaigns

Donald Trump and Kamala Harris have been campaigning vigorously, seeking last-minute support in key battleground states. In her final rally in Pennsylvania, Harris stated that America was ready for a "fresh start." Trump urged his supporters to vote during his last event in Michigan, both states critical to the election outcome.

Pre-Election Landscape

With Trump and Harris virtually tied heading into Election Day, investors are carefully watching the returns, as the winning candidate's policies could influence various sectors, including oil, gas, Big Tech, electric vehicles, and financial services.

Analysts' Insights

UBS analysts highlighted potential risks to European cyclical stocks if Trump wins, especially companies with exposure to China, which faces import tariffs. They noted that industries and utilities would be at risk if green spending initiatives are rolled back. Although Trump's possible tax cuts and deregulations could provide some support for energy and financials, tariffs and increased bond yields might heavily influence market sectors.

If Harris wins, analysts predict a continuation of current policies that would lessen negative impacts on European stocks. They expect initial reactions in the European equity market to remove 'Trump trades'—including the US dollar and Bitcoin—triggered by Trump's election chances.

Long-Term Market Dynamics

Despite potential initial reactions, analysts believe the equity market will revert to fundamental drivers, which have historically influenced equity performance more significantly than specific presidential policies.