Goldman Sachs analysts have suggested that a Donald Trump victory in the 2024 presidential election could be beneficial for the stock market, but not all sectors will see the same impact.
What Happened: An analysis by Goldman Sachs indicates that a Trump win in the 2024 elections could lead to a significant boost in the S&P 500. This is in line with the historical trend of Republican victories, which have historically yielded higher returns for the index, reported Business Insider.
Goldman’s team of analysts, led by Jan Hatzius, reviewed Trump’s presidency to assess the extent of regulatory easing. They discovered that although fewer new rules were created during his term, the overall number of regulations did not significantly decrease.
Goldman Sachs’ analysis suggests that a Trump win could lead to a “deregulation agenda,” which would ease restrictions on certain industries. This prediction is based on Trump’s previous term in office, during which there was a reduction in some regulations, although this was offset by increases in other areas.
Despite the potential for a Trump win, the analysis also notes that the winner will still face fiscal limitations. However, a second Trump victory is expected to bring about more rollbacks on energy and environmental policies and financial regulations.
From 1928 to 2016, the S&P 500 averaged an 11.28% gain during election years. A Republican victory resulted in a higher average return of 15.3%, while a Democratic win also delivered positive returns at 7.6%, according to Morgan Stanley.
Macroeconomic factors often play a larger role in market outcomes than elections. For instance, the S&P 500 fell by 9% in 2000 as the tech bubble burst months before George W. Bush’s Republican win. Similarly, the index dropped by 37.0% during the 2008 financial crisis, coinciding with the Democrats and Barack Obama’s victory.
Investors looking to mitigate political uncertainty may want to consider sectors with high exposure to federal regulations, such as energy, utilities, financials, healthcare, industrials, materials, and telecommunications. Sectors with less exposure include consumer discretionary and staples, technology, and real estate, according to the report.
Why It Matters: The potential impact of a Trump presidency on the markets has been a subject of discussion among investors. Investors were seen weighing the potential impacts of a Trump presidency on sectors like electric vehicles and long-term interest rates. Trump’s unpredictable style historically led to sharp market fluctuations, favored by some hedge funds adept at capitalizing on such volatility.
Trump’s influence on the stock market has been a topic of interest for some time. In December, Trump criticized the booming stock market for disproportionately benefiting the rich. He also took a swipe at President Joe Biden for the present economic state.
However, in May, the U.S. market hit a record high, providing an opportunity for President Biden to respond to his rival Trump for a comment the latter made during a 2020 presidential debate.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
