In a report released on Tuesday, Goldman Sachs analysts put together estimates under various election outcomes. Seems like, no matter who wins (Trump or Biden) we will see not so rosy S&P 500 (INDEXSP: INX) numbers.
Donald Trump is considered to be the more business-friendly candidate in the race for the US presidency. Joe Biden, on the other hand, has already announced that in the event of an election victory, he will revoke the incumbent government’s tax breaks, raise capital gains taxes and advocate stricter regulation. Some market participants and analysts therefore fear that under Biden as president, corporate profits and the economy itself could shrink – and the US stock market could suffer as a result.
According to Goldman Sachs, such fears are exaggerated. Even in a “blue wave” scenario the analysts expect only short-term effects on the markets. “A Democratic victory would probably only have a moderate impact on the profit development of the S&P 500 companies, according to a recent study.
It is noted that the bottom line is hardly any impact:”The combination of higher corporate taxes, rising government spending and lower tariffs would probably lead to similar profits in the S&P 500 in the medium term as in our base scenario, in which we do not expect any noteworthy changes on the part of politics,” said Goldman’s chief U.S. equity strategist David Kostin.
The Goldman strategists also assume that economic relations between the US and China could relax under Biden as president. If the current tariffs are reversed, the earnings of the companies in the S&P 500 could rise by four percent as early as 2022.