Goldman Sachs senior strategist warns stocks could see ‘considerable’ pre-election downside that isn’t being factored into models

Abby Joseph Cohen


  • Goldman Sachs’ Abby Joseph Cohen told Bloomberg on Thursday that markets could see “considerable downside” before the election due to factors that financial models aren’t picking up. 
  • These factors include the outcome of the election and what Congress and the president will do next before election day, Cohen said. 
  • The senior investment strategist added that the market is vulnerable to volatility and disappointment given the”wide gaps” in the relative valuation of stocks.

Goldman Sachs’ Abby Joseph Cohen told Bloomberg on Thursday that markets could soon see “considerable downside” based on factors that financial models cannot predict.

What Congress will do next, what the president will say, and how the election will end cannot be forecasted by modeling, the senior investment strategist said.

“Those of us who have lived our professional lives really focusing in on the math, I think should feel very humble right now,” Cohen said. “Because what we recognize is that the models may not be able to properly reflect all of the volatility not just in the markets, but in the economy, in policy, and of course in investor sentiment.”

Read more: Warren Buffett’s Berkshire Hathaway shocked investors with its Snowflake and Barrick Gold bets. A veteran shareholder explains why they might be part of a new strategy

While Cohen said that it’s not unusual for volatility to rise before an election, there’s also been “erratic movement” with regard to fiscal policy. Stocks quickly sold off on Tuesday after Trump tweeted that negotiations for the next stimulus plan would be halted until the election. 

The famed strategist also said there are “wide gaps” in the relative valuation of stocks. Just a handful of stocks drove the market’s record rally following its March lows. Cohen said this can make the market more volatile, and

Goldman Sachs Warned It Will Soon Be Scrambling To ‘Catch Up’ On Bitcoin

Goldman Sachs
GS
, along with other Wall Street giants, has been eyeing bitcoin and cryptocurrency markets this year—and has already taken some big steps into the space.

Those steps follow the bitcoin price, up some 40% so far this year and hovering at a little over $10,000 per bitcoin, finding support through a roller coaster 2020 as a potential hedge against a wave of inflation that some see on the horizon.

Now, after it was announced last month a 20-year Goldman Sachs veteran will be joining merchant bank Galaxy Digital in early 2021, the firm’s founder and chief executive, Michael Novogratz, has warned Goldman will soon be scrambling to catch up with its head start in bitcoin and crypto.

“Goldman Sachs is going to have to get into crypto themselves,” Novogratz said, speaking over the phone, adding Galaxy Digital has “an advantage” in understanding decentralized finance and crypto but Goldman Sachs has “a ton of talent” that it will use to catch up within the next “three of four years.”

Last month, Galaxy announced Goldman Sachs partner Damien Vanderwilt will be joining the firm early next year as co-president and head of global markets, tasked with closing the shrinking gap between Wall Street, bitcoin and crypto.

“I see a relatively steady drive into the space now,” Novogratz said, pointing to a flow of Goldman and Wall Street executives into the bitcoin and cryptocurrency industry over the last year. “The macro backdrop at the moment is making the bitcoin and crypto story very powerful.”

Novogratz sees China’s looming launch of its bitcoin and blockchain-inspired digital yuan as well

Goldman Sachs Says Election Fears Are Overblown; Suggests 2 Stocks to Consider

November 3 is just around the corner, and Wall Street’s gaze has locked in on the race to the White House. Biden currently leads in the polls, but it’s still anyone’s race.  

Now, with President Trump’s COVID-19-related hospitalization rocking the last leg of the 2020 presidential election campaign, and Senate control also up for grabs, fears regarding a divided government are circling the Street. 

That said, this might not be such a bad thing, if you ask Goldman Sachs. “A divided government scenario would lead to a smaller change in interest rates and a reduction in political uncertainty,” the firm’s chief equity strategist David Kostin wrote. The strategist argues that such an outcome could push the S&P 500 to 3,700, which would reflect an 11% gain, with the index reaching 4,000 by mid-2021. 

But what will happen if Biden comes out on top? Kostin believes a blue wave wouldn’t be as bad for the market as some might think, with it actually having a “modestly positive net impact.” He explained, “A large increase in fiscal spending, funded in part by increased tax revenue, would boost economic growth and help offset the earnings headwind from higher tax rates.” 

Taking Kostin’s outlook into consideration, we wanted to take a closer look at two stocks getting a round of applause from Goldman Sachs. As the firm’s analysts think each has more room to run, we used TipRanks’ database to find out even more about both tickers.  

Avient (AVNT) 

Hoping to overcome challenges and unlock the potential of innovation and sustainability, Avient works to create specialized and sustainable materials that enhance performance and protect the environment. Based on the strength of its core business, Goldman Sachs is pounding the table.  

Representing the firm, five-star analyst Robert Koort acknowledges that shares have been