Wall Street And Politics: Goldman Sachs Says, Trump Or Clinton, There’s Still Plenty of Money to Be Made
As Donald Trump and Hillary Clinton prepared for their first presidential debate Monday, the global mega-bank Goldman Sachs sent a message to investors: Even amid the uncertainty of the 2016 election, there’s still plenty of money to be made. “We recommend clients vote with their wallets,” wrote David J. Kostin, the bank's chief U.S. equity strategist, in a briefing released hours before the debate. “Focus on the likely beneficiaries.”
Goldman notes that ahead of most presidential elections, the stock market becomes more volatile in reaction to political uncertainty. This election has bucked that trend, as investors assumed that a Clinton victory is inevitable. With the polls tightening, Goldman predicts, investors will have to factor in the possibility of a Trump presidency. In Goldman-speak: “We believe the current below-average level of uncertainty is unlikely to persist," Kostin wrote.
But no matter who wins, the Goldman Memo assures investors that they can still cash in.
Those looking to beat the markets should bet on companies that rely on the government spending for their revenue stream. “Both candidates have advocated increased infrastructure spending and would also likely support higher defense spending,” Kostin wrote. Those companies, according to Goldman’s analysis, are currently undervalued. Both Trump and Clinton have promised to boost infrastructure spending, and Trump in particular has made rebuilding the U.S. military a centerpiece of his campaign.
Even with an uptick in public spending, many of Goldman's investors are spooked about a potential change in federal tax policy. “Tax reform will also likely be a focus of the new administration,” Kostin warns. “Many investors have asked about the possibility of a change in tax rates.” Based on Goldman’s reading of the market, however, the firms with the most to lose from a change in the tax rate are currently performing well.
Goldman also recommends its investors keep a cautious eye on the healthcare sector. “[It] appears to be the sector most at risk from the election,” the briefing predicts. “Health care providers are among the few industries that have demonstrated a statistical relationship with election odds in recent months.” With Clinton promising to rein in drug prices, and Trump vowing to overhaul Obamacare, investors in the healthcare industry have a lot on the line.
Perhaps more than any other company, Goldman Sachs has become synonymous with the Wall Street financial elites who’ve become a punching bag in this election cycle. Goldman CEO Lloyd C. Blankfein is a longtime Clinton ally, who’s raised hundreds of thousands of dollars to support her political career. After Clinton left government in 2013, she gave a number of speeches to Goldman for which she was paid $675,000. Clinton’s primary rival Bernie Sanders constantly demanded that she release the transcripts of those speeches; she declined.
In the GOP primary, Donald Trump criticized his closest rival Ted Cruz for taking a loan from Goldman —where his wife Heidi Cruz works—to finance his campaign. Trump, however, has strong links to the bank himself: His national finance chairman Steve Mnuchin and his campaign manager Steve Banon are former Goldman employees.
© Copyright IBTimes 2024. All rights reserved.