LONDON (Reuters) - A victory of Democratic candidate Joe Biden in U.S. elections along with his party controlling the Senate and the House of Representatives would be slightly beneficial to S&P 500 profits through 2024, Goldman Sachs (NYSE:GS) analysts said on Tuesday.
The investment bank said its predictions were in stark contrast to what's expected by most market participants, who see "a blue wave election to have major downward ramifications for earnings".
Goldman models a 4% upward revision by 2024 to its baseline earnings forecast, which assumes no change in policy, and the potential earnings outlook under policies expected to be enacted in the event of a Democratic sweep.
"From an earnings perspective, a Democratic sweep could have a modestly positive net impact on the trajectory of S&P 500 profits", the analysts wrote in a research note, adding that other factors should play a bigger role in shaping the future profits.
"Over a medium-term horizon, the status of a vaccine, the path of the economic recovery, and Fed policy will be more important in determining equity valuations than the outcome of the election."
The end of the uncertainty surrounding the November election should in any case support stocks, they said.
"Regardless of the outcome, the resolution of the election should help reduce equity risk premium and support valuations".