Goldman Sachs looks for clues from the first U.S. presidential debate

Goldman Sachs states that the first televised debate between incumbent U.S. President Joe Biden and former leader Donald Trump shifted market probabilities in favor of a Trump victory.

According to the brokerage, the debate window saw modest gains in U.S. equities and bond yields and mixed performance across FX. “Shifts in asset prices were small relative to the shifts in election outcome probabilities,” Goldman Sachs added.

The investment firm expects a clearer and a broader USD strength from a shift towards a Republican presidency compared to the movement in the FX markets. Goldman Sachs emphasized that there were clearer moves towards USD strength right ahead of and early in the debate.

“But the market may also not yet be fully focused on the policy outcomes from a Trump presidency, particularly with respect to potential tariff policies,” the brokerage noted.

Goldman Sachs sees front-end inflation longs, upside in nominal rates, and deep downside in major equity indices as potential hedges against some key tail risks that it sees around the U.S. presidential election.