GS “Midterms outcome will rank low on list of macro drivers of equity market returns” | Forexlive
With four weeks to go until the vote, polls and prediction markets point to a divided government the most likely outcome, Goldman Sachs wrote in a note.
There is a 85% likelihood that Republicans gain control of the Senate, the House or both, and just a 15% likelihood that Democrats maintain unified legislative control.
Historically, a divided Congress has been more favourable for stocks as many investors believe it makes sweeping reforms less likely to pass, keeping the investment backdrop more stable.
“Equities typically perform well following midterms as political uncertainty declines,” GS strategists said.
The S&P 500 has generated a median return of 3% through year-end and 17% during the 12 months following midterm elections, Goldman Sachs’ analysis of the last 90 years showed.
“However, we believe the election outcome will rank low on the list of macro drivers of equity market returns,” strategists added.