The outcome of the US presidential election remains open. The Democratic challenger Joe Biden didn’t achieve a blue sweep. With the victory in Florida, the incumbent Republican President Donald Trump can still have justified hopes of remaining in the White House. In the coming days, everything will amount to a showdown in a few states, where counting is still ongoing due to the flood of votes cast by mail. These include Michigan, Pennsylvania and Wisconsin in particular.
It can take up to three days before the results are announced. But even if Biden should win by a narrow margin, further uncertainties could be imminent. Trump spoke of "fraud" even before the vote and he tweeted on Wednesday morning that "They (the Democrats) are trying to steal the election". According to media reports, legal challenges by the Republicans against the results of the absentee ballot have already been prepared. The result will therefore be a long time coming. We have already outlined this in our "News from the financial markets" (link) in the run-up to the elections.
The financial markets have so far reacted calmly to the non-result. However, the restrained reactions so far are no guarantee that it remains like that. There could stronger swings in the coming days.
Against this backdrop, we recommend continuing to stick to the long-term portfolio strategy, but overweighting cash over bonds. This reduces the interest rate risk in the portfolio, while offering some protection in the event that the equity markets dive. In addition, in the ongoing low interest rate environment, broad diversification across alternative asset classes is important to make the portfolio resilient. In our view, gold in particular lends itself to this.
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