10/6/20
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. 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. 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 employment "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.in the second half of 2022, nearly two years earlier than under Trump's plan, Moody's said. 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. Not only is Trump trailing nationally overall, but his lead over Biden on the economy specifically has vanished in polling. 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."