Blue wave on US election day may unleash $2.5 trillion in stimulus – Goldman Sachs

Omkar Godbole FXStreet Contributor

Goldman Sachs said Monday in a note that a "blue wave" of victories in next month's US Presidential Elections that would give Democrats control of both houses of parliament could lead to a whopping $2.5 trillion new stimulus plan.

Key quotes (Source: Bloomberg)

The stimulus plan would likely include a stimulus package in Q1, followed by infrastructure and climate legislation. In this scenario, we would expect legislation expanding health and other benefits, financed by tax increases, to pass in Q3.

The boost to growth from fiscal stimulus would outweigh the adverse effects of tax increases, particularly because the increased tax revenue would finance fund new spending.

The spending would only widen the already record budget gap, putting upward pressure on borrowing costs. The US 10-year yield rose to a high of 0.80% early Thursday, the highest level since June 10.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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