Investors in the UAE and the broader Middle East are rapidly reshuffling their investment portfolios, pumping up allocations to the safe haven asset gold big time, while cautiously investing in select equities in defensive sectors, as the US presidential election is sprinting for a photo-finish, market experts told Arabian Business.
Cryptocurrencies, although volatile, are also gaining traction as a diversification tool, especially among younger investor demographics who are keen on digital assets.
Market experts also have a tip for Middle East investors – they can trade on the CBOE (Chicago Board Options Exchange) volatility index (VIX), a popular measure of the stock market’s expectation of volatility – to act as a hedge for their portfolios in the days leading up to the US elections.
The VIX has risen by 14 per cent in the month of October alone, and in the 2020 election, the index saw a 40 per cent rise that lasted for three days post-election as votes were counted and the winner was announced.
“The tight race between Kamala Harris and Donald Trump is prompting UAE and Middle Eastern investors to closely monitor potential shifts in US policy, with strategic adjustments emerging,” Mohamed Hashad, Chief Market Strategist at Dubai-based Noor Capital, told Arabian Business.
“Investors in the region often value stability and predictability in the US market, leading to a cautious approach as both candidates present divergent policy outcomes,” he said, revealing that asset reallocations are leaning more toward resilient investments such as gold and selective equities in defensive sectors.
Vijay Valecha, Chief Investment Officer at Dubai-based Century Financial, said amidst uncertainty reigning high on which administration takes the Oval Office with the US election results just under a week away, one asset that Middle East investors have flocked to in such an environment is the safe haven – gold.
“The precious metal has risen more than 5.5 per cent in the last month alone, with a year-to-date return of just around 35 per cent, outpacing major asset classes,” Valecha told Arabian Business.
Central bank demand, geopolitical tensions, and election uncertainty are among the many factors adding to the tailwinds for gold.
Market uncertainty remains prevalent
Market participants said as the election result is still not one-sided, uncertainty in the region’s markets remains prevalent.
With no clear frontrunner, many Middle East investors are betting cautiously, they said.
However, though the presidential race remains neck-and-neck, there is a growing sentiment among investors about a possible Trump victory, as the former president has managed to get a slight edge ahead of Harris recently, leading to investors being bullish on the stock markets.
According to the latest RealClearPolitics Poll national averages, Trump is sitting at 48.4, while Harris is at 48.0.
“Middle East investors, along with investors around the world, have increasingly raised the bets of a Trump win, which is clear in the way certain assets are performing,” the Century Financial Chief Investment Officer said.
“Trump’s pro-business tax-cutting policies are bolstering the equity markets to record highs as Trump is starting to lead in the election polls,” he added.
Hashad said the likelihood of a Trump presidency, with his policies fostering stock market growth and lower oil prices, could influence regional investors to remain engaged in US equities, albeit with caution, balancing potential returns with heightened volatility concerns.
The S&P 500 has given a 7.29 per cent increase in the past 3 months alone, marking a 22.29 per cent year-to-date, with a boost in its momentum from the benefits of a 50-bps interest rate cut last month.
Interestingly, Trump’s own business ventures are also gaining big of late, with the Trump Media & Technology Group Corp. (DJT) rising over 200 per cent in October alone as election dates come close.
Valecha said the bond market is looking volatile, with bond prices falling and yields rising, as the selling continues on outlooks of Trump’s growth strategies being implied as inflationary to the markets, forcing the Fed to rethink their plan of interest rate cuts.
“Moreover, although both candidates have voiced their support for cryptocurrencies, Trump has stood as a stronger advocate, which is reflected in Bitcoin’s strong one-month performance of about 13.5 per cent in October, taking the year-to-date return above 70 per cent as of now,” he said.
Influential regional factors also causing investment shifts in Middle East
Market experts said beyond the US election, UAE and Middle Eastern investors are also influenced by factors like economic diversification initiatives, global energy market trends, and local regulatory changes supporting alternative asset classes.
The region’s initiatives toward sustainable investments and fintech are encouraging a shift toward green and tech-focused assets, allowing investors to align with global ESG standards, they said.
“Besides, with oil markets experiencing fluctuations, diversification into non-oil sectors and digital assets like cryptocurrency is also becoming an attractive hedge for investors, showcasing the region’s adaptability to shifting global economic dynamics,” Hashad said.
Valecha said economic diversification, technology, and regulatory reforms remain key drivers of investment trends in the Middle East.
“For instance, countries like Saudi Arabia and the UAE are hard at work divesting from oil dependence into other sectors such as technology, renewable energy, and tourism.
“These economies are also seeing sovereign wealth funds increase their allocation to alternative assets, such as private equity and infrastructure,” he said.
Changes in regulation, for instance, regarding cryptocurrency and DeFi within the UAE, also create environments that are more attractive to investors.
“In essence, geopolitical stability and increased regional cooperation move the dial on the attractiveness of the GCC as an investment destination.
“These will pre-eminently ensure an entertaining dynamism in the changing investment world, making it of interest to regional and international investors,” Valecha said.
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