Why stock-market investors should fear a 2020 election ‘sweep’ most of all

Investors worried about how the stock market will react to next year’s federal elections shouldn’t take their cue from the presidential horse race alone.

That’s because “fear of such a unified government outcome on Election Day 2020 is substantial at the same time that confidence, so very important to markets and economies, remains fragile albeit stabilizing,” Emanuel said in a Sunday note. Survey data and other indicators show chief executives remain wary of the futures and hesitant about planning, particularly with regard to capital spending, as the trade wars have taken “both a psychological and a real toll on businesses,” he said.

Goldman Sachs said it expects the bull market in U.S. equities to continue in 2020, with a durable profit cycle and continued economic growth set to lift the S&P 500 by around 5% to 3,250 in early 2020. But rising “political and policy uncertainty” will keep the index rangebound for most of 2020, they said.

Tim Moe, Goldman’s chief Asia-Pacific equity analyst, in a Bloomberg interview, spelled it out more directly, warning that the prospect of a rollback of the 2017 corporate tax cut by a unified Democratic government could spark “possibly even up to a 20% correction on the S&P.

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