Goldman Sachs Predicts Low Probability of Post-Election Bear Market
Goldman Sachs analysts have forecasted a mere 18% chance of stocks entering a bear market following the upcoming presidential election. The investment bank cites healthy economic conditions as a key factor supporting stock resilience, despite potential volatility in the coming months.
Recent weaker macroeconomic data has been attributed to temporary factors such as strikes and hurricanes, rather than underlying economic weakness. However, rising bond yields have been identified as a potential risk to stock performance. Analysts note that while stocks can generally handle higher yields driven by economic growth, rapid increases in bond yields or real yields could pose a significant threat to equities.
The outcome of the election is expected to have varying impacts on bond yields. A victory for former President Donald Trump could lead to higher bond yields due to inflationary policies such as tariffs and deportations. Conversely, a win for Vice President Kamala Harris with a split Congress might result in lower bond yields.
The Federal Reserve’s monetary policy could also be influenced by the election results, potentially affecting bond yields. The central bank recently implemented a significant rate cut in September, and another 25 basis point cut is anticipated shortly. However, opinions are divided on the likelihood of further cuts, with some strategists predicting a pause while others foresee continued easing due to an economic slowdown.
Despite these uncertainties, the stock market has shown strong performance, with the S&P 500 rallying over 21% this year. The current bull market celebrated its second-anniversary last month, but investors are bracing for potential volatility if election results are delayed.
The close race between Harris and Trump adds another layer of uncertainty to the market outlook. Investors remain concerned about the impact of an unclear election outcome on market stability, with many preparing for increased volatility in the coming weeks.
As the election approaches, market participants will be closely monitoring economic indicators, Federal Reserve actions, and polling data to gauge potential market movements in the post-election landscape.
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