UBS: So what’s the worst that can happen?
Market participants must try to sort through a range of potential scenarios to assess what impact the presidential elections in the US could have upon both the global economy and financial markets. While there are a seemingly infinite number of possible outcomes between the presidential and congressional races, we will have narrowed our focus to just one: what we perceive as the “worst-case” scenario for the 2016 elections.
13.05.2016 | 10:58 Uhr
We are now just six months away from what promises to be one of the most contentious presidential elections in the history of American politics. While neither party has settled upon a nominee just yet, the electoral calculus behind the nominating process provides a formidable advantage to the two front runners – Hillary Clinton and Donald Trump.
Keep in mind however, that this election marks the first time that the two presumptive party nominees’ disapproval ratings are higher than their approval ratings. So in contrast to prior election cycles where a presidential candidate’s popularity at the polls could also be expected to translate into electoral gains in Congress, the disaffection within both parties for two front runners makes the electoral outcomefar less predictable this time around.
Market participants must therefore try to sort through a range of potential scenarios to assess what impact the results could have upon both the global economy and financial markets. While there are a seemingly infinite number of possible outcomes between the presidential and congressional races, we will have narrowed our focus to just one: what we perceive as the “worst-case” scenario for the 2016 elections.It’s important to keep in mind that this analysis is based upon likely market reactions, and is not intended to express any bias or preference for either candidate or party.
Divisive politics and a legal threat
As stewards of wealth, our primary responsibility always rests with the effective and prudent management of risk within client portfolios. This suggests that our analysis must begin with an assessment of what we view as the most likely worst-case risk scenario. While some countries must deal with potential coups and/or suspension of civilian control of government, no such event is likely in the US. We can therefore exclude any “extra-constitutional” outcomes for the 2016 general elections in our analysis.
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