With Election Day just five weeks away, investors are growing increasingly fearful of a contested presidential election—and UBS is the latest Wall Street firm to warn about increased stock market volatility telling clients to buy safe-haven assets like gold.

  • The looming standoff between President Donald Trump and Democratic nominee Joe Biden could lead to disputed results with no clear winner on Election Day, which would weigh heavily on the stock market, UBS warned clients.
  • Trump has thrown into question whether he would accept a peaceful transfer of power if he loses;  meanwhile, a rise in mail-in ballots—as the coronavirus keeps many people from voting in person—could also lead to delayed results.
  • “A contested [election] outcome is still a possibility, which could add to further volatility and result in safe-haven flows,” UBS chief investment officer of global wealth management Mark Haefele told clients in a recent note.
  • The firm said that because of a “far-from-certain” election outcome, clients should buy gold, a traditional safe-haven asset that tends to perform well during times of economic uncertainty.
  • Although gold prices fell by more than 4% last week—their worst decline in a month and a half—UBS said that the recent pullback was just a temporary correction and that gold is set to rally higher going into the election.
  • “Concerns over renewed Covid-19 restrictions, U.S. fiscal stimulus and ongoing U.S.-China tensions have all weighed on risk sentiment, which traditionally favors safe havens such as gold,” Haefele said.

Gold prices have surged so far in 2020 amid the coronavirus pandemic. With the U.S. economy in a recession since February with high levels of unemployment, the precious metal has been a popular trade for investors seeking to hedge against volatility. Gold prices topped $2,000 per ounce for the first time ever in August. UBS said that gold will also continue to rally thanks to support from the Federal Reserve, which has pledged to keep interest rates near zero until at least 2023 in a bid to help the economic recovery. “With this gridlock ongoing, we acknowledge that the Federal Reserve will remain accommodative,” Haefele added.