Goldman: A Kamala Win Could Negatively Impact Stock Prices, Yields, and the Dollar
The impact of a Trump or Harris administration on the economy has been a hot topic of discussion, especially in the wake of this week's presidential debate. Goldman Sachs has analyzed the potential economic outcomes of both scenarios. The findings suggest a modest economic boost under a Kamala Harris administration and a slight hit to the economy under Trump.
During the debate, Harris highlighted this analysis, stating that her economic plan would strengthen the economy, while Trump's would weaken it. However, this conclusion is largely based on Goldman Sachs' stance that illegal immigration equates to "strong growth and lower inflation". This view overlooks the social implications of illegal immigration, such as the strain on social safety nets and increased crime rates.
Trump's Tariff Policy and Immigration Crackdown
Trump's tariff policy proposes significantly higher import taxes on goods entering the US. While this could increase government revenue, it could also lead to higher prices for goods and services for Americans. Goldman Sachs economists estimate that a one percentage point increase in the effective tariff rate could raise core inflation by a tenth of a percentage point. Trump's proposed tariffs range from 10% to 20% on most goods, with Chinese goods facing a 60% tariff.
Trump also promises to increase oil drilling to lower prices, but the feasibility of this promise is questionable. The US is already producing more oil than any other country in history.
Furthermore, Trump's proposed immigration crackdown could lead to higher inflation. If mass deportations occur, businesses may struggle to fill open positions, forcing them to raise wages and pass those costs to consumers. Even deporting 1.3 million workers, a figure lower than Trump's proposed 10 to 20 million deportations, could result in an "inflation shock" that lifts inflation by 1.3 percentage points after three years, according to research presented at the Peterson Institute for International Economics by Australian economist Warwick McKibbin. This would also lead to a 2.1 percentage point decrease in the Gross Domestic Product (GDP).
Goldman Sachs CEO Responds
Goldman Sachs CEO David Solomon addressed the debate and the Goldman economist report in an appearance on CNBC. He clarified that the report came from an independent analyst and examined a handful of policy issues proposed by both sides to model their impact on GDP growth. Solomon emphasized that the difference between the sets of policies was about two-tenths of 1%.
Market Implications of Election Outcomes
Goldman Sachs has presented several election outcome scenarios and their potential market implications. A Republican sweep, currently given a 32% chance, would result in a stronger USD, higher US equities, and higher US yields. A Harris presidency with a divided Congress, given a 29% chance, would result in a slightly weaker USD, lower to neutral US equities, and lower US yields. A Democratic sweep, given a 20% chance, would result in a slightly weaker USD, slightly lower US equities, and higher US yields. A Trump presidency with a divided Congress, given a 16% chance, would result in a slightly stronger USD, slightly lower to neutral US equities, and slightly higher US yields.
Of these scenarios, the only one that would result in higher stock prices is a Republican sweep. This is not the endorsement Harris was hoping for.
Morgan Stanley has also published a note from its economist team, which found several favorable economic outcomes to a Trump victory.
Bottom Line
The economic impact of a Trump or Harris administration is a complex issue with many variables to consider. While some analyses suggest a slight economic boost under a Harris administration, this is largely due to the controversial assumption that illegal immigration leads to economic growth and lower inflation. Furthermore, a Harris victory could potentially lead to a stock market wipeout. These are important considerations for voters and investors alike. What are your thoughts on this analysis? Do you agree or disagree with these predictions? Share this article with your friends and let us know your thoughts. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.
Goldman: A Kamala Win Could Negatively Impact Stock Prices, Yields, and the Dollar
The impact of a Trump or Harris administration on the economy has been a hot topic of discussion, especially in the wake of this week's presidential debate. Goldman Sachs has analyzed the potential economic outcomes of both scenarios. The findings suggest a modest economic boost under a Kamala Harris administration and a slight hit to the economy under Trump.
During the debate, Harris highlighted this analysis, stating that her economic plan would strengthen the economy, while Trump's would weaken it. However, this conclusion is largely based on Goldman Sachs' stance that illegal immigration equates to "strong growth and lower inflation". This view overlooks the social implications of illegal immigration, such as the strain on social safety nets and increased crime rates.
