Investors Urged to Buy Protection Amid Potential Volatility Ahead of U.S. Election

According to a report released Tuesday by BCA Research, investors should consider buying protection now, as the volatility observed in August is likely to resurface due to the closely contested U.S. election race.

The report emphasizes the importance of preparing for potential market disruptions, noting that the volatility experienced earlier this month may be just the beginning. It highlights that immediate risks to global stability, particularly related to the U.S. election, are being overlooked.

Polling data indicates a tight race between Vice President Kamala Harris and former President Donald Trump for the White House. BCA’s chief geopolitical strategist, Matt Gertken, warns that unpredictable events could significantly impact the election outcome. Potential risks include election interference from Russia, which may use tactics such as an oil embargo or sabotage to influence the race. Russia’s strategic interests in Ukraine could make a change in U.S. leadership a key objective.

Additionally, the Middle East is flagged as another potential factor that could sway the election, with expectations of further regional escalation.

Despite these uncertainties, Gertken estimates a 55% chance of a Trump victory and suggests that Harris will need to demonstrate resilience against anticipated global instability.

As the election approaches, the potential for negative surprises in the market increases, making it crucial for investors to seek protection. BCA recommends increasing exposure to defensive and high-quality stocks while reducing investments in cyclical sectors. For a flight to safety, the firm advises buying the U.S. dollar and Japanese yen against the euro.

This strategy aims to mitigate risks and safeguard against the anticipated volatility in the lead-up to the election.