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October 2020

MARKET PULSE | October 2020

Macro Views


Vaccine developments continue to be positive, with Superforecasters in the Good Judgment project placing a 52% probability that 25 million doses of an FDA-approved vaccine will be available by Q1 2021. Even so, some surveys suggest that only 50% of Americans are willing to take the vaccine and the demand is only slightly stronger in non-US countries. Read More

Fiscal Policy

The window to passing fiscal stimulus pre-election has narrowed, but the odds of a larger scale package under a unified Democratic government has increased for 2021. If prediction markets and polls are right, a Democratic sweep opens the door for a ~$2 trillion package in Q1 2021. In all other outcomes, a series of smaller bills with targeted relief may be more likely. Read More

US Election

In 2016, early absentee ballots comprised 41% of the total, but the nature of the virus may turn a greater share of ballots by mail. State rules on vote tabulation vary, meaning vote authentication delays across 11 states including key battleground states of MI, PA, WI are expected. Read More


The future EU-UK trading relationship remains unclear as the EU contests the UK’s Internal Market Bill, which makes provisions to reinterpret parts of the prior Brexit withdrawal agreement. While the official transition deadline is December 31, the effective deadline may be as soon as this month-end to make time for ratification. A (limited) trade agreement is in the interest of both sides, so a deal is likely to be reached despite the current impasse. Read More

Monetary Policy

The Fed’s meeting codified its stance of taking a patient rather than pre-emptive approach to inflation targeting. Our evaluation indicates a slower pace of policy rate hikes, with rates unlikely to change through 2024. Read More

Market Views


Despite September’s pullback, we are still constructive on this bull market as we enter the early stages of a new investment cycle. Equities will likely remain supported by vaccine progress, robust fiscal and monetary policy, and further economic recovery. Additionally, as the tech revolution transforms the economy and markets, companies with greater digital footprints may continue to drive valuations and returns. Read More


Option market pricing suggests an extended period of high volatility beginning around Election Day and lasting for months thereafter. Implied volatility jumps on November 4, pricing an S&P 500 move of nearly 3%, and remains elevated well into 2021. This dynamic reflects the possibility of final election results to be delayed and for an extended equity market reaction to the competitive race, but also for timing of vaccine news. Read More


The impact of COVID-19 across EM sovereign markets has been varied, with higher quality and more resilient issuers continuing to outperform. High yield external EMD may offer attractive spread and duration opportunities relative to US HY bonds. The local EMD outlook is contingent on FX, where we are cautious on the current macro, volatility, and carry environment. Read More


On page two, we address the market implications of key legislative agendas that both US presidential candidates have laid out in the three “Ts”: 1) tech, 2) trade, and 3) tax implications. While the campaign platforms of the two candidates differ on each, the market impact to these areas might be more digestible than it appears. Read More

Policies: The Three “Ts”

With the US election nearing, Americans are putting the legislative agendas of both presidential candidates under the microscope. Currently, proposals are broad and ever-evolving, increasing uncertainty around how these platforms may turn into policies. Even so, we think the market moving issues are limited. Three key areas come to mind: 1) tech, 2) trade, and 3) taxes. To be sure there are differences in substance and style between the candidates, but the market impact of either candidacy to these areas might be more digestible than it appears.

Trade Relations

US-China trade relations reflect another political issue elevating uncertainty. To date, trade tariff news has on average dragged US equities by 1.2%1. A Trump administration may emphasize a unilateral approach to trade relations while a Biden leadership might rely on multilateral solutions. Methods differ but both sides are likely to continue to focus on China and globalization. Re-shoring supply chains across critical industries is a likely objective of either administration.

Source: Bloomberg and GSAM.

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