The current scenario on Wall Street, in which technology stocks lead gains during the COVID-19 pandemic, maybe over. According to analysts at Goldman Sachs, the approval of a vaccine in the coming months should change the landscape and lead investors to return to looking for roles more linked to the growth of the economy is up to three months, including favoring the flow to emerging countries.
The American presidential election, scheduled for November 3, will also take more weight in the decision of investors as the date approaches, according to Goldman professionals. One factor to be observed with caution, however, is the reopening of American schools in large cities, intended for the end of September, which can have direct consequences on the spread of the coronavirus.
“Three months from now, the market will be able to see a substantially different scenario,” wrote Goldman analysts, Kamakshya Trivedi, Zach Pandl, and Dominic Wilson. “Market views on these three issues are likely to be the main catalysts for markets from now on.”
For analysts, the approval of a vaccine against COVID-19 in the United States, which hopes to happen in late November, will challenge current assumptions about the faltering recovery of the economy and the expectation of negative real interest rates for a long time. With this, the so-called cyclical actions, of sectors more linked to economic growth such as commodities and consumer companies, and banks can favor and take the lead in the roles of large technology companies, which have benefited from the behavioral changes caused by the pandemic. Such a move may even benefit assets from emerging countries.
“Although the vaccine itself can provide faster benefits to the US economy, this rotation would also traditionally favor indexes outside the US (including European stocks) and would also alter perceptions of risk in the economies of emerging countries, where virus control has been shown, the challenger. As these developments take place, along with an expected change of government in the US, they can open space for the rotation in emerging stocks, should commercial risks decrease, while tax risks within the US increase, ”says the Goldman report Sachs, pointing out that a victory for Democrat Joe Biden against President Donald Trump should start to be more priced, although they predict a tight election.
According to Goldman analysts, the clashes between the U.S. and China will continue to be present regardless of who wins the American election, but a possible Biden government tends to change U.S. tactics and use far less Trump’s tariff-raising policy, in addition to seeking a rapprochement with traditional allies such as Europe. On the other hand, a new Democratic administration may rekindle the risks of tax increases within the United States, including on technology companies, which would contribute to changing the scenario in the markets.
“With the US presidential election now less than three months away, it is increasingly becoming the central focus of conversations with customers. Most of the attention is still focused on domestic implications – including changes in taxes and spending that may or may not occur under a different government, ”say Goldman professionals.