Goldman Sachs' latest prediction for the U.S. election: Harris wins, but will become a "lame duck president."
Although this is currently the most likely implicit situation, the outcome still carries a high degree of uncertainty.Author: Shi Zhengcheng, Caixin News
Goldman Sachs, in a research report released this week, stated that under the current circumstances, this year's U.S. election may result in a "lame duck President Harris."
From an optimistic perspective, this scenario successfully avoids the chaotic prospect of Trump imposing tariffs indiscriminately, while Harris's radical economic policies will also lose their scope for implementation.
Harris is in the Lead
Goldman Sachs noted that currently, in national polls, Harris is approximately 1.5 percentage points ahead of Trump and has taken the lead in the key swing state of Pennsylvania. Overall, Harris has about a 52%-54% chance of winning in November. Since she took up the mantle of challenging Trump from Biden, the election situation has continued to improve over the past month.
Since August 1 of this year, the probability of the Republican Party winning the election has decreased by 10 percentage points, while the probability of the Democratic Party achieving a "divided government"—meaning Harris becomes President but the Republican Party controls both houses of Congress or at least one house—has increased by 11 percentage points.
Goldman Sachs also pointed out that while this is currently the most likely implied scenario, the outcome remains highly uncertain.
According to statistics, various U.S. election polls generally indicate that Harris is in the lead, though the margin is not large—at most 5-6 percentage points.
Source: 538
Compared to the tight race between Harris and Trump, Democratic vice-presidential candidate Tim Walz has pulled ahead of Vance by 6 percentage points.
For both sides' support rates, there will be a significant test ahead—the campaign debates. The first debate between Harris and Trump is scheduled for September 10, with the second debate in October. The only debate between Walz and Vance will take place on October 1.
Market Confusion
As Harris begins to unveil her economic agenda, U.S. stock analysts have sadly realized that the "Trump trade" they wrote about last month will face a completely opposite "Harris trade."
For example, on Monday, Harris proposed raising the corporate tax rate from 21% to 28%, which her team described as "ensuring billionaires and large corporations pay their fair share." In contrast, during Trump's term, the corporate tax rate was lowered from 35% to 21%, and he sought to make temporary tax cuts permanent.
The good news is that higher tax rates are expected to alleviate the significant troubles of the U.S. budget deficit, but Goldman Sachs also anticipates that for every percentage point increase in the corporate tax rate, the S&P 500 index (constituents) will see a "slightly below 1%" reduction in profitability.
In addition to tax increases, last Friday, Harris also proposed a plan to combat price gouging by retailers, while expanding the Biden administration's "federal healthcare procurement" and clean energy projects. These proposals may put pressure on consumer staples and healthcare stocks, while also alleviating the burden on renewable energy stocks. The previous "Trump trade" was seen as favorable for small-cap stocks and cryptocurrencies, with the underlying logic being deregulation and tax cuts.
Given the current trend of extreme polarization and division in U.S. politics, it is likely to be very difficult for both Trump and Harris to advance their most pressing economic policies in a "lame duck" state.
