U.S. President Donald Trump, with Speaker Nancy Pelosi and Vice President Mike Pence looking on, delivers the State of the Union address in the chamber of the U.S. House of Representatives at the U.S. Capitol Building on February 5, 2019 in Washington, DC.

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Citi is boosting its stock forecast for 2020, despite growing uncertainty about the future regulatory environment for business as the U.S. barrels toward a contentious presidential election.

The bank raised its year-end 2020 S&P 500 target slightly to 3,375 from 3,300, because of the better gains this year versus the 3,050 objective for 2019. The index is up more than 5% over the past 3 months amid growing optimism about a phase-one trade deal with China. It has seen a more than 19% gain over the past year.

The S&P 500 closed slightly positive on Friday at 3,145.91, erasing its losses for the week after a blockbuster jobs report. The U.S. economy added 266,000 jobs in November, crushing analyst projections of 187,000. Unemployment fell to 3.5%, matching its lowest level since 1969.

“The outlook for next year is a bit muddied, given various uncertainties, with a pivotal US presidential election potentially being the most significant environmental risk,” Citi wrote in the note.

A Donald Trump re-election would bring its own risks of unpredictable policy on trade, diplomatic relations and global order, the bank wrote.

“The elections backdrop remains a major uncertainty overhang, even though the last year of a presidential cycle tends to generate respectable returns,” Citi wrote.

The second half of 2020 could prove more challenging, the bank noted, as surveys indicate rising unemployment rates and tighter profit margins in the fourth quarter. The yield curve also suggests volatility by late 2020.

“Signs of political polarization remain, arguing for close polling, and thus, we suspect that the Street will become wary by mid-year.”

However, the bank noted that the second half of the election year tends to be more favorable for markets in general.

Citi also wrote that trade tensions between the U.S. and China “are not going away quickly” and could last for more than a decade, even if the two countries sign a so-called phase one agreement next year.

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