Political developments are expected to remain a major focus for investors next year, but UBS believes their market impact may be brief.
In a report led by UBS chief investment officer Mark Haefele, the bank said that political headlines will stay “front and center in 2026,” but historical patterns show their influence on markets is often short-lived.
UBS notes that while trade policy, domestic politics, and geopolitical tensions created volatility in 2025, investors have now shifted their attention back to “solid economic fundamentals, falling interest rates, and structural growth drivers like AI.”
Trade policy is likely to be one of the most important pressure points. UBS points out that the U.S. Supreme Court is preparing to rule on the administration’s use of the International Emergency Economic Powers Act to impose tariffs. The decision could affect “around 70% of tariff revenue.”
If the current tariffs are overturned, UBS warns that “new, more targeted tariffs are likely,” which could raise uncertainty—especially if major trading partners retaliate.
However, UBS also stresses that a divided Congress, which it sees as the most probable outcome after the midterms, “could limit major shifts in trade policy.”
Leadership changes will be another key factor shaping investor sentiment.
UBS expects the Federal Reserve to appoint a new chair in 2026. The new leader will face challenges tied to high inflation and rising debt, but the bank believes monetary policy will remain broadly supportive for markets.
The U.S. midterm elections may also bring headline risk, though UBS emphasizes that “markets typically look past election cycles.”
Globally, UBS highlights persistent political risks. These include potential instability in France and the U.K., ongoing conflicts in Ukraine and the Middle East, and a busy election schedule across Latin America.
In Asia, investors will focus on Japan’s fiscal plans and China’s new Five-Year Plan, which emphasizes “growth, security, and technology.”
