(Bloomberg) -- The high-stakes US presidential election could disrupt investor optimism in the country’s stock market after a recovery since the summer selloff, according to strategists at Goldman Sachs Group Inc.
The team led by Christian Mueller-Glissmann said that “elevated policy uncertainty” — especially related to US corporate tax reform — may test bullish positioning in equities, which has been rising since the stock-market selloff that began in mid-July.
Growing concerns about when companies will see the benefits of high spending on artificial intelligence could also weigh on US stocks, he warned. Mueller-Glissmann remains neutral across regions, but said he sees “more benefits from international diversification into year-end.”
US stocks are back at record highs after sliding this summer, as investors bet that the Federal Reserve has started cutting interest rates in time to avert a recession. Signs of additional stimulus in China have also boosted sentiment in recent days.
Seasonal trends are also supportive for the S&P 500, which has gained an average of 4.7% in the fourth quarter in the past 25 years, according to data compiled by Bloomberg.
However, market strategists have been warning that corporate earnings are vulnerable to policy changes after the presidential election. A team at Goldman Sachs said earlier this month that S&P 500 profits could shift in the ballpark range of 5% to 10%, depending on how the policies are enacted and whether Donald Trump’s 2017 tax cuts are allowed to expire.
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