October 6, 2020
Goldman Sachs: A Blue Wave Of Democrats In November May Be Good For The Economy
Economists at Goldman Sachs believe if a blue wave in the election gives Democrats control of the presidency, the Senate and the House, it would be good for the economy.
“All else equal, such a blue wave would likely prompt us to upgrade our forecasts. The reason is that it would sharply raise the probability of a fiscal stimulus package of at least $2 trillion shortly after the presidential inauguration on January 20, followed by longer-term spending increases on infrastructure, climate, health care and education that would at least match the likely longer-term tax increases on corporations and upper-income earners,” Goldman Sachs economist Jan Hatzius wrote to clients on Monday, according to Yahoo Finance.
Talk of a blue wave has been occurring since Trump was elected in 2016. Many in the Democratic Party took Trump’s win as a sign to regroup and start working on a grassroots, nationwide plan for 2020.
The fact that this year has been unlike any other in history has only helped. Trump’s response to the coronavirus pandemic, the recession, neither of which are close to ending, and the resurgence of the Black Lives Matter movement, which Trump has denounced, have pushed millions to take politics more seriously in order to keep Trump from a second term.
According to a Reuters poll conducted after Trump announced he contracted the coronavirus, Democratic nominee Joe Biden is leading Trump in the presidential race by a commanding 10 percentage points. A Wall Street Journal/NBC News poll of registered voters has Biden leading the presidential race 58% to 39%. The poll was conducted minutes after the first debate between Biden and Trump.
Those on Wall Street are also wondering how a Biden presidency and a Democratic controlled government would benefit them as well in the form of a second stimulus package.
“Clearly the market seems to be focused on the potential for a fiscal stimulus, it’s definitely needed for sustaining the spending power of consumers,” Charles Schwab Investment Management CIO of Passive Equity and Multi-Asset Strategies Omar Aguilar said on Yahoo Finance’s The First Trade. “What is clear after last week’s labor report is when we see the participation rate continue to slow down and income continues to go down, the need for fiscal stimulus is right there.”
However, a Biden presidency also comes at a cost for finanical giants and Wall Street big wigs. According to Goldman Sachs’ equities strategist David Kostin, Biden’s tax plan would force the company to reduce its earnings estimate by 12%. Also, Biden wants to increase the corporate tax rate from 21% to 28%, something that is bound to scare some on Wall Street away from Biden.