Goldman Sachs nominate that the status of a vaccine, the path of the economic recovery, and Fed policy will all be more important in determining equity valuations than the outcome of the election, over a medium-term horizon.

And:

  • We forecast 13% upside to our unchanged mid-2021 S&P 500 target of 3800
  • Within the equity market, a variety of industries and baskets are reflecting election risk.

GS do bow to the inevitable though and provide commentary on the election impact. In summary:

From an earnings perspective, a Democratic sweep could have a modestly positive net impact on the trajectory of S&P 500 profits.

  • However, our earnings forecast depends on the specific sequencing and size assumptions made regarding corporate tax reform and fiscal stimulus.
  • In contrast, most market participants believe a blue wave election would have major downward ramifications for earnings.

The most direct consequence of a Democratic sweep on S&P 500 profits is the likelihood of corporate tax reform.

  • Our political economists believe a pared-down version of the proposed Biden tax plan would eventually become law in the event of a Democratic victory, but that it would be phased in starting in 2022.
  • A large increase in fiscal spending, funded in part by increased tax revenue, would boost economic growth and help offset the earnings headwind from higher tax rates.
Goldman Sachs nominate that the status of a vaccine, the path of the economic recovery, and Fed policy will all be more important in determining equity valuations than the outcome of the election, over a medium-term horizon.