Investing.com - In the context of the global electoral cycle of 2024, financial markets face uncertainties and opportunities due to the possible changes in the governmental policies of significant economies. This election period, which encompasses key nations such as the United States, the United Kingdom, India, Mexico, and South Africa, has led analysts at J.P. Morgan to adopt cautious and proactive strategies.
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In the United States, the possibility of significant changes in trade, foreign, regulatory, and fiscal policies depending on the election outcome is looming. To mitigate risks, thematic baskets of stocks designed to cover various political scenarios have been created. In the realm of commodities, an administrative change could result in a lighter regulatory burden for oil and gas companies, although with downside risks for base metals and agricultural exports due to potential trade wars and a stronger dollar.
On the other hand, recent market developments show a cautious approach. Last week was marked by expectations of long-term inflation in the U.S. and signals from the ECB for a possible cut in June. Strategies include maintaining a neutral stance on duration in the U.S. and the Eurozone ahead of inflation data, with bets on steepeners to benefit from a steepening yield curve.
In the UK, despite solid economic data, the Bank of England adopted a dovish stance, boosting bullish bets on the SONIA curve. Meanwhile, in emerging markets, although rate cuts persist, there is a lower expectation of future reductions, influencing a neutral stance on local duration.
In the bond arena, despite an increase in issuance, investment-grade bond spreads in the U.S. narrowed due to robust demand, indicating solid technical conditions. In European credit, a limited range in the short term is anticipated due to an environment where "bad news is good news."
Finally, in the currency market, although a medium-term bullish outlook on the U.S. dollar persists, tactical concerns arise from incipient signs of a slowdown in U.S. growth exceptionalism and investor oversaturation in long positions.
These trends and strategies reflect investors' need for adaptability and caution in a context of potentially disruptive political change, where attention is focused on protecting against various contingencies and seizing emerging opportunities.
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