Goldman Sachs: A Democratic sweep would mean faster economic recovery
S E E D E D C O N T E N T
President Donald Trump is once again warning voters that Democrats would "shut our economy and jobs down" if they win in November.
Goldman Sachs is telling its clients the exact opposite.
Just hours after Trump's all-caps Monday morning tweet predicting economic disaster, Goldman economists pointed out that polls "suggest a 'blue wave' in which Democrats gain unified control of Washington is becoming more likely" — and they're not suggesting investors dump stocks.
In fact, "all else equal, such a blue wave would likely prompt us to upgrade our forecasts," Goldman Sachs chief economist Jan Hatzius wrote in a Monday report.
It's true that if Democrats sweep into power early next year, it would likely translate to higher taxes and regulation. Such a reversal from the Trump agenda could eat into corporate profits and the earnings for affluent families.
But Joe Biden is also promising a bonanza of government spending that, coupled with extremely low interest rates, would likely speed up the economy.
Goldman Sachs wrote that a blue wave would "sharply raise the probability" of a fiscal stimulus package of at least $2 trillion shortly after the January 20 inauguration. The bank also cited Biden's longer-term spending plans on infrastructure, climate, health care and education.
Taken together, this spending "would at least match the likely longer-term tax increases on corporations and upper-income earnings," Goldman Sachs wrote.
"It would likely result in substantially easier US fiscal policy, a reduced risk of renewed trade escalation, and a firmer global growth outlook," the report said.
Moody's: 7.4 million more jobs under Biden's plan
Goldman Sachs isn't the only Wall Street firm to point out the positive benefits of a blue wave.
Moody's Analytics found that Biden's economic proposals, if enacted, would create 7.4 million more jobs than would Trump's. The economy would return to full employmentin the second half of 2022, nearly two years earlier than under Trump's plan, Moody's said.
"The economic outlook is strongest under the scenario in which Biden and the Democrats sweep Congress and fully adopt their economic agenda," wrote Moody's economists led by Mark Zandi, who advised Senator John McCain during the 2008 presidential race.
Although few on Wall Street had expected a sweep for Democrats earlier this year, that thinking has changed significantly.
"We view a 'blue wave' as the most likely outcome of the election," strategists at UBS wrote to clients Monday.
The prediction markets are also pointing to a blue wave, though it's no slam dunk. A bettor on PredictIt can pay 58 cents to win $1 if Democrats win the White House, Senate and House in 2020. That's up from 43 cents in late August.
Polls leaning in Biden's direction
It's too early to say how Trump's fight with Covid-19 will impact the election. But Biden's lead over Trump expanded to its widest yet in a CNN poll conducted after the first debate and a few days after the president's coronavirus infection was made public. Among likely voters, 57% back Biden and 41% support Trump.
Not only is Trump trailing nationally overall, but his lead over Biden on the economy specifically has vanished in CNN's polling.
In May, 54% of registered voters said Trump would handle the economy better, compared with 42% for Biden. Now it's tied, with 49% of registered voters backing each candidate. Among likely voters, Biden gets 50%, compared with 48% for Trump. That's little changed from the last CNN poll, conducted August 28 to September 1.
Citing FiveThirtyEight polling averages, Goldman Sachs also pointed out that Biden leads by an average of six percentage points in the "most likely tipping-point" state: Pennsylvania. Biden expanded his lead to 12 percentage points in Pennsylvania in a new Monmouth University poll of registered voters published Tuesday.
Biden also holds smaller leads in Florida and Arizona. Goldman Sachs notes those battleground states "should finish their voting around midnight and could therefore resolve the uncertainty earlier than widely expected."
'Mixed' impact for stocks
In other words, clear-cut wins for Biden in Florida and Arizona could lower the risk of a contested election, a nightmare scenario that would rattle financial markets. And that, in turn, could boost markets that have been bracing for post-election turmoil.
Looking at the bigger picture, a blue wave would create newwinners and losers on Wall Street.
For instance, oil-and-gas companies, private prisons, student lenders and some banks could underperform because of the risk of new regulation. High-tax stocks that benefited from Trump's corporate tax cut could get punished, too, but companies that would benefit from increased spending on infrastructure, education and clean energy could outperform.
"A blue wave would have mixed implications for broad US equity indices," Goldman Sachs wrote, adding that stronger government spending and faster economic growth would be a positive for cyclical sectors of the market.
When will the Fed get off zero?
One risk for the stock market is that it alters Wall Street's expectation of never-ending easy money from the Federal Reserve.
The US central bank has signaled rock-bottom interest rates are here to stay, through at least 2023. Goldman Sachs thinks the Fed won't hike rates until early 2025. Those forecasts have essentially forced investors to bet on stocks because returns on government bonds are muted.
But if Democrats sweep in November, the economy could speed up so much that it creates long-elusive inflation, forcing the Fed to act. Goldman Sachs said its analysis suggests a blue wave could pull forward the Fed's first rate hike by up to two years.
"The rising probability of a blue wave," Goldman Sachs wrote, "adds to our sense that markets may have become too complacent about Fed policy."
Even if markets object to rate hikes, average Americans would benefit if the economy is growing fast enough for the Fed to begin gradually raising interest rates.
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How about a swift kick in the nuts for Trump and his cult. -----
I wonder if the financial gurus at Goldman were able to foretell their own failing as a company that required a bailout loan?
Are you saying that Trump is a better businessman than the honchos at Goldman Sachs?
Seriously, WTF???????
How did THAT particular question pop into your head based on the following:
[deleted]
The word Trump appears 12 times in the seeded article, including in the first sentence in the article and in the third sentence in the article.
And you think Trump is off topic?
Yikes.
Are you saying Goldman Sachs is more honest than Trump?
I have no love for Goldman Sachs. The point of the article is that "Wall St" seems to think Biden will be better for the economy.
As as far as honesty goes, almost anyone on earth is more honest than Trump.
[deleted]
Wall Street is ultra pro Establishment. Biden is a part of the very same Establishment politicians that bailed Wall Street's sorry asses out while fucking over main street. So of course they want Biden over Trump!
They want to protect themselves and fuck the rest of us over again in the process; and Biden is a far better bet for doing that than Trump.
Totally missed the point, dude. I put up a straw man just as egregious as yours was of Texan1211
Yes, yes you did. But the facts do show Goldman Sachs has actually made money while Trump has only lost it even though both do some despicable things. How else would Trump pay virtually no taxes for at least the last decade? He was given nearly half a billion by his daddy and has squandered his inheritance and owes hundreds of millions. Trump is a loser and Goldman Sachs sees that and are obviously not betting on this feckless moron in the white house to be able to actually effect a rational financial recovery from the pandemic.
Yes. Interesting you don't seem to care how but seem to mind with Trump.
Goldman Sachs doesn't give a damn about economic recovery. They only care about making money. If they think Biden is their better bet you can be sure it doesn't necessarily mean anything good for the rest of us.
Yeah John, it's win win right?
If Biden wins and the recovery doesn't happen, it's all Trumps fault. If it does happen it was all Biden's doing right?
You can't lose baby, you can't lose.
And one of the lefts darling economists predicted a Global recession if Trump got elected.
And please John, don't try to say Krugman was predicting the pandemic recession .....
Sparty, in all fairness, isn't that what the Obama people were saying? That the recovery was on the way and Trump inherited it?
In truth, economics is a long game. It helps in the short run, but really things put into motion will just play out for the most part.
That's the problem with some of these people. They don't want to wait for the economy to get back on its feet. They want it NOW! They want instant gratification and it's not possible with our current economic situation. It took the Obama administration at least 5-6 years before we started seeing results in economic growth
Sharp recessions led to sharp recoveries, at least pre Obama. Obama’s recovery was the worst post WWII...
Yes, that is my point.
The game of politics is afoot, once again.
Using that logic (which i happen to agree with to a fairly large extent but only partially since it IS much more complicated than just who is POTUS) the boom experienced during the Clinton years was mostly Reagan and Bush's doing but Clinton took credit for that regardless. Hell, many people here will tell you it was all Clintons doing to this day and will come up with all kinds of rationalizations for Clinton in that case.
Are you one of them?.
Slow and steady wins the race. Just ask the tortoise
Clinton took over an economy that was booming at 5% growth. I've never heard a Democrat call the 90s the George Bush economy.
Nor did they blame Clinton for the recession that officially started six weeks after George W Bush was sworn in.
And you never will. You especially will never hear it called the Reagan Economy.
Which it really was imo.
False, the US was in a mild recession, and unemployment was at 7.3%. GDP growth in 1993 was 2.8%. Since fiscal years end 9/30, the year a president takes office is credited to the president leaving office because you're already 4 months into that fiscal year, and policies don't instantly affect the economy.
I disagree with you on Reagen. I think that Clinton did something that was totally unique to any other president and that brought down the National Debt, and that had a huge impact on the economy. And that is not a rationalization. That is a fact. Did Reagen help, probably, but not to the degree that brought the economic prosperity that we had during the Clinton years.
Well, that's simply false. I assume you are talking about the recession that ended in 1991, almost two years before Clinton was sworn in.
GDP growth
As I said, the economy was booming in the 4th Quarter of 1992, Bush's last full term in office. It took until 1996 for the Clinton economy to have such a productive quarter. Granted, the media spent 1992 telling everyone how bad the economy was doing to help Clinton, but 30 years later believing that fake narrative is no longer acceptable as the numbers speak for themselves.
the year a president takes office is credited to the president leaving office because you're already 4 months into that fiscal year, and policies don't instantly affect the economy.
So you are arguing that Clinton took over a booming economy, and left it in recession.
The 2008 great recession was the worst since post WWII. And under Obama there was a recovery that was steady and strong. He got unemployment down to 4.7% before leaving office and had cut the deficit in half. But some conservatives never want to give him even a speck of credit because it would destroy their anti-Obama narrative they've convinced themselves of which is why they hated what they would refer to as "boy" in the oval office... they can't admit to themselves that their real issue was that he was a highly educated constitutional scholar and professor because he's black and that doesn't square with the vision of "n*&^%r's" they were raised to hate and disrespect. No doubt those same bigoted folk flocked like fucking half witted moths to the racist dumpster fire that is Donald Trump.
The worst recovery since WWII, despite the sharpest recession. Why do you deny reality?
The rule is the sharper the recession, the more rapid the recovery, at least pre Obama.
atives never want to give him even a speck of credit because it would destroy their anti-Obama narrative they've convinced themselves of which is why they hated what they would refer to as "boy" in the oval office... they can't admit to themselves that their real issue was that he was a highly educated constitutional scholar and professor because he's black and that doesn't square with the vision of "n*&^%r's" they were raised to hate and disrespect
Seems like some projecting going on., You never seem to discuss Obama without brining up his race. One can only wonder why.
GHWB was a one term president because of the economy. Unemployment was at 7.3%. If the economy was 'booming', it wasn't doing so for average Americans. People were sick of 'Reaganomics' because it became obvious that it primarily benefited the already wealthy at the expense of everybody else. Republicans are still stuck on this nonsense philosophy because it allows them to reward their rich benefactors; they simply don't care that it screws the middle class and below. If they cared, maybe their administrations wouldn't always end in disaster.
Well as stated, we all know it's more complicated than just one or two POTUS's but related to them:
People forget, the economic expansion in the Reagan years was record breaking for the time. As we rang in the 90's we were at a "peace time" record breaking pace of nearly 90 consecutive months of economic growth. Unemployment was down to a 15 year low from over 8% to about 5%, nearly 20 million jobs were created from 82-89, another record for it's time. The markets were no longer stagnant like they had been in the previous decade. The S&P alone nearly tripled in Reagan's time. Etc, etc
So credit where credit is due. Reagan clearly set the table. Clinton deserves credit as well for "serving the food" as it were. Largely by beginning to reduce deficits with his 93 budget but if it weren't for Reaganomics, it likely never would have boomed like it did. We can argue the minutia all day long but those ARE the facts.
So both do deserve credit and yet, people here continue to give only Clinton credit. That was my main point. Clinton ..... who left Bush-2 a rapidly slowing economy that slipped into recession just weeks after he was sworn in.
Alrighty then .....
Shit will probably get done if Democrats held the Legislative and Executive Branches
So true and it would all be shit.
Left wing shit
So getting the ultra rich to pay their share and little people like me get more than 74 dollars a month in my paycheck more is shit?
Good to know where you stand.
Just like in 2009-10 when they controlled the federal government to an extent not seen since LBJ...
That led to a Republican majority in both houses in 2012.
You'd do well to stop trying to put words in my mouth.
As once again, you don't have the slight idea what you are talking about .....
You're the only one that puts words in your mouth, Sparty.
Now since I tire of you and I need a break, [deleted Toot-a-loo!]
LOL, do you really think a President Biden is going put more money in your pocket? Biden has made it clear he's going tax the shit out of the middle class.
Prove that.
Read the entire article scrolling below the ads.
[deleted]
Instead of cherry-picking what he said, here is an actual video of what Biden actually said. What I heard is that he is going to raise taxes on corporations.
So I am not sure where Breitbart got their quote from, because it was not from that debate.
Lol ... hardly ..... [deleted]
Who goes to Breitbart for facts, anyway?
with veto proof majorities in the house and senate, all things are possible.
That's what I'm talking about. Give a little boost to the economy, people start working again, people spend money, more people working, more people spending....next thing you know you can start paying down the debt
Unless the SC is stacked with conservatives and the GOP sues over every little thing all the way to the Supreme Court
evrey time the Dems pass anything.
That's a possibility.....but those remaining GOPers might want to think about holding onto their seats
Wharton Analysis: Biden Plan Would Lead To Greater Economic Growth
Isn't where Trump claimed to have attended?
That's a rousing endorsement for an alumni!
An Alumni who had threatened Penn with a law suit if they released his grades...
Trump’s Wharton Professor: “Trump Was the Dumbest Goddamn Student I Ever Had”
Trump is so dumb he failed his Covid test!
I'm surprised he didn't pay Steven Miller or Kellyanne Conway to take it for him...OPPS!
He couldn't. Everyone in the damn gop has it!
Of course it will. Democrats are the party of peace and prosperity. The gop is all about money, power and keeping working people down and out. History is replete with Democratic booms and republican busts! If you don't know that you haven't been paying attention. Try and catch up with the rest of the class.
I've watched this truth be repeated over and over during the last 40 years. After Reagan/Bush, we had unemployment at 7.3%, a recession, and gov’t borrowing increased by 300%. After Clinton, we had full employment, a booming economy, and gov’t borrowing reduced by 2/3s. After GWB, we had the worst recession since the Great Depression, unemployment at 8%, and gov’t borrowing increased by 1,300%. After Obama, we had full employment, a robust economy, and gov’t borrowing reduced by 2/3s. Trump's tax cut is busy adding $1.9T to the debt (primarily to benefit the already rich), his trade war devastated farming and drove manufacturing into recession, his purposely crippling the pandemic response has resulted in 200,000+ dead, 8% unemployment, and the gov’t pulling $6 trillion out of its ass to try and save us.
The middle class and below are the economic engine of this country. They decline under Republicans and flourish under Democrats.
Per your own argument above, Clinton is responsible for the 2001 recession.
What Clinton & Obama handed to their successors was infinitely better than what Reagan/Bush, Bush II, & Trump handed/will hand to their successors. And in each case, policy decisions made that difference. We didn't have to be coronavirus central for the planet, the corrupt, malignant narcissist Trump can take full credit for that.
yepp, because joe had 47yrs in politics to show his economic prowess...
but he waited until now to show everyone how it's done.
and if ya believe that? I got a bridge to sell.