What's going on?

A recent report from investment bank Goldman Sachs showed what investors think will happen when November�s US election rolls around. Jackpot.

What does this mean?

Specialist prediction markets currently show the Democratic Party will win majorities in the House of Representatives, the Senate, and the White House, but Goldman Sachs� analysts used two more indicators. First, the options market: the bets investors are making on future prices suggest, on average, that the Senate majority and president mightn�t actually be confirmed by the end of Election Day. That�s because there�s high implied volatility after the election date, which hints that investors are expecting continued uncertainty. Then Goldman looked at US stocks, whose recent ongoing rise seems to show investors are comfortable with the Democratic majority outcome reflected in polls and prediction markets.

Why should I care?

For markets: Electile dysfunction.

Higher-than-usual levels of investor uncertainty going into the end of the year � particularly concerning the US election � are partly down to coronavirus. Last election, 60% of the electorate voted on Election Day, while the rest voted early or by mail. But the proportion of voters using alternative methods will probably be even higher this time because of social distancing guidelines. In a tight vote with more sources to account for, it�ll be harder for investors to know whether they�re coming or going.

Zooming in: Wrong side of the tax.

Some companies� earnings are more sensitive than others to the tax increases a Democratic government might bring. But Goldman�s analysts noted that those firms� stock prices still haven�t fallen enough to reflect the increased chances Democrats will win. Still, there�s at least one industry that seems well aware of the looming threat to its bottom line: healthcare companies � whose profits might feel the effects of the party�s healthcare policies � have seen their stocks underperform in line with the rising likelihood of a Democratic majority.