US midterm elections to bring more volatility

With the US midterm elections on the horizon, volatility is expected to surface in the final stretch of the year, according to State Street Global Advisors (SSGA) senior investment strategist, Raf Chaudhury.

However, in his view, investors should be left relatively unscathed and those who hold course might be potentially rewarded, especially in midterm years.

Commenting on the China trade pressure, Choudhury said little progress was expected towards a resolution over the next several months.

“We believe that Trump has signalled a shift towards China and that the market has recognised the fact that things could get worse before they get better,” he said.

At the same time, European trade negotiations seemed likely to progress although were unlikely to conclude before the midterm elections. Further, Choudhury stressed that there was a political desire among Republicans to get an agreement on NAFTA (North American Free Trade Agreement) before the midterms, which looked to have been enough to get a deal passed. However, the new trade deal would still need Congressional approval.

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“With midterm elections just weeks away, our view is that we are entering a bit of a lame duck period in relation to policy,” he added.

“As we go into the final stretch of the year, volatility will continue to surface its head and risks are hovering around. We expect investors to be left relatively unscathed and for investors that hold course, history shows potential for them to be rewarded, especially in midterm years.”