David Kostin, Goldman’s Chief US Equity Strategist, offers his take on the upcoming US mid-term elections due on November, 6 and its impact on the US equity markets.
Key Quotes:
“If the consensus expectation of a divided government turns out to be correct, the most likely political consequences would be an increase in investigations and uncertainty surrounding fiscal deadlines,”
“Three sectors are likely to remain solid — pharma, defense and aerospace — because gridlock will likely mean no new regulations and no cuts to spending.”
“Our economists believe that the President’s veto power and the lack of political consensus regarding appropriate trade policy reduce the likelihood that either Democrats or Republicans enact legislation that will resolve the ongoing trade tensions,”
“In fact, market pricing suggests that the China-US trade conflict is worsening.”
Kostin believes efforts on infrastructure boost will fall short. They suggest clients stay in tech “given stable growth, high margins, limited macro sensitivity, and strong cash flow generation,” with software and services firms particularly solid.
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