Goldman Sachs Sees S&P 500 Volatility Rising Before Midterms, With 0% Median Pre-Election Return
Updated
Updated · Yahoo Finance · Aug 2
Goldman Sachs Sees S&P 500 Volatility Rising Before Midterms, With 0% Median Pre-Election Return
3 articles · Updated · Yahoo Finance · Aug 2
Summary
Three months before the U.S. midterms, Goldman Sachs said political developments are likely to become a bigger driver of market sentiment and lift S&P 500 volatility in coming months.
13 midterm election years since 1974 show economic policy uncertainty usually rises in August and stays elevated through the following months, supporting the bank’s call to keep exposure to equity index volatility.
Low stock correlations have recently kept index volatility subdued despite higher single-stock and factor volatility, but Goldman expects that cushion to fade as earnings season ends and macro issues regain focus.
The S&P 500’s median return from early August to Election Day has been 0%, Goldman said, before typically improving to a 6% median gain in the three months after the vote.
Mutual funds and foreign investors have also tended to cut U.S. equity exposure before midterms and rebuild positions afterward, reinforcing Goldman’s view that elections, geopolitics and rate swings will steer markets into November.