Extraordinary meeting of the Union Investment Committee
RoRo meter now at 4, Moderately bullish risk positioning
At an extraordinary meeting, the Union Investment Committee (UIC) has decided to make adjustments to the model portfolio. Equities from industrialised countries will be overweighted and, in return, the cash position will be reduced. As a result, the general risk positioning will rise from neutral to moderately bullish (RoRo meter from level 3 to level 4).
Democrats secure congressional majority
As well as seeing their candidate enter the White House as president, the Democrats will now have a congressional majority, albeit a narrow one, following victory in the run-off ballots for the US Senate seats that were still unfilled. Joe Biden thus has the legislative mechanisms in place that he needs to forge ahead with his economic and socio-political agenda. However, there will be no progressive Senate because the Democrats’ majority is as slim as it gets. There will be 50 Democrat seats and 50 Republican seats. The Democrats will only have the upper hand because the future US Vice President, Kamala Harris, will be the Senate President and have the tie-breaking vote. Biden will therefore depend on the broad support of his party and, in many cases, of the Republicans too. This will significantly limit his options, for example when it comes to tax increases.
The UIC believes the election result is the best possible outcome, both for the economy and for the equity market. On 20 January, an effective government headed up by Joe Biden will take the reins. A potential legislative stalemate has thus been avoided, opening the door for more economic stimulus and infrastructure programmes. At the same time, the slim majority in the Senate will make it almost impossible for the Democrats to go it alone, especially if they want to raise taxes. As a potential negative factor for US companies has thus become highly unlikely, the UIC has decided to expand its position in equities from industrialised countries.
As at 7 January 2021