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1/ A THREAD: Goldman Sachs just gave a massive downgrade to the US economy because of #COVIDー19. How might that affect the 2020 presidential election?
2/ Here is the gloomy new baseline forecast from GS, lopping a percentage point from 2020 real GDP growth (Q4/Q4) to a meager 1.0%:
3/ No incumbent party has won the presidency with an economy that weak in the postwar era. Indeed, that GS-forecasted rate of growth for 2020 would be slower than in 2016 (1.6% vs. 1.3%, year-over-year), a rate which likely hurt Hillary Clinton.
4/ The Economist’s @gelliottmorris says his model suggests that w/ a negative 10-point approval rating gap, Trump would win 49% of the 2-party vote w/ a 2% econ. Trump probably only needs to win about 48.5% to win the EC. But he is currently at -9 with an econ slowing toward 1%.
5/ Some blame Al Gore's 2000 loss to George W. Bush on a mild economic slowdown, despite overall 4.1% growth. Growth slipped to just 0.5 percent in the third quarter and 2.5 percent in the fourth of that year.
6/ As one analysis put it, "Our best guess, however, is that the slowdown was a major factor in Gore's defeat… the long economic boom that arrived just a little too late to get George Bush re-elected in 1992 seems to have ended just in time to elect his son."
7/ Of course, the Trump campaign can blame the virus. But will excuses matter to people losing their jobs or facing stagnant wages? Also: If not for the trade war, the economy might be stronger and more resilient to outside shocks.🤔
Don’t forget about Wall Street. Barclays: “The rapidity of the deterioration in financial markets has elements of a viral pandemic induced panic that, if left unchecked, could spread to business and consumer confidence [and] lead to reductions in spending and hiring"
Also note that a) GS forecasts more rate cuts (a 50bp rate cut by March 18 followed by another 50bp of easing in Q2) and b) this isn't the banks worst-case scenario:
10 and Final/ But maybe all the old rules and heuristics no longer apply. Maybe. And these econ + virus forecasts could be overly pessimistic. Possibly. Hopefully. Then again the Trump WH seems worried:…
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