SocGen: Goldman Is Wrong, And You Shouldn't Bet On The GOP Boosting Stocks

Earlier we wrote about Goldman’s contention that mid-term elections are usually a basis for stocks to surge, but there may be some problems with that thesis this time around.

Societe Generale has put out report on the matter, and if their central scenario of stalemate is achieved, equities aren’t going to rise for very long. And if the Republicans win big, stocks aren’t going to win either.

From Societe Generale:

Election Scenario

Photo: Societe Generale

If Republicans are to win, we’re likely to see more fiscal restraint from Congress and over-reliance on QE. There may be a bump for stocks in the short-term, but Republican restraint could do economic damage.

One target for conservatives could be the extension of unemployment benefits, which could crush 5 million Americans if it was to be halted.

Unemployment Chart

Photo: Societe Generale

But a more profligate Democratic Congress poses a threat to U.S. sovereign debt, and a potential increase of interest payments on debt as a percentage of government revenue. The dollar would get slammed in this outcome, and treasuries may see a shock downgrade.

US Sov Debt

Photo: Societe Generale

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