(Washington)

In what seems slightly odd timing, Goldman Sachs is going on the record about the 2020 election. The bank is saying Donald Trump is likely to win re-election. Goldman says his lead is “narrow” but that his chances are improved by the crowded Democratic field and the success of the economy. What is so interesting about the call is that in runs in contrast to most polls, which Goldman points out, saying “While we believe the majority of market participants expect President Trump to win a second term, we note that prediction markets point in the opposite direction and imply that the Democratic candidate has a 56% probability of winning and the Republican candidate has a 44% chance”.

FINSUM: We have to agree with Goldman. Trump’s base seems to have grown in strength since his initial election, and the politics of the left seem more likely to fragment their base (including into third party candidates) that unite them behind a single leader.

(New York)

The market has been fretting about real estate for over a year now. Numbers in the sector have been in a funk and there is a definite weakening occurring. However, that may prove short-lived as a new factor may slowly push that market back into a sustainable boom cycle. That factor is the grow of $15 per hour minimum wages across the US. Such wages are likely to significantly increase the earning power of millions of Americans, allowing many couples to afford to buy a home. For instance, a couple with one worker at Target and another at Bank of America could afford to buy up to a $300,000 home at the new wage levels.

FINSUM: If the new higher wage rate takes hold, it is likely to unlock a major source of untapped demand for housing.

(New York)

Goldman Sachs investors took it on the chin this week. Earnings numbers just released look pretty grim, especially as compared to some other banks, like JP Morgan, which had good showings. The bank got hit by a triple whammy of lower trading revenues, weaker private equity profits, and lower fees from investment banking, all of which conspired to bring earnings down by 20% in the first quarter. David Solomon, CEO, is promising the company is undertaking a “front to back” performance review of Goldman’s businesses.

FINSUM: This looks particularly poor because JP Morgan was able to achieve the highest ever quarterly profit of a US bank during the same period.

(New York)

Netflix has been hammered recently by news that Disney is launching its own streaming service. The stock saw a major selloff on Friday (4%) because of the threat the Disney move theoretically poses to Netflix’s model. However, the fears seem overblown, providing a buying opportunity of Netflix. Analyst Scott Devitt from Stifel explains, “We see little risk to Netflix growth plans and pricing power against this new offering given Netflix’s most popular price point should remain lower than the Disney bundle while Netflix is on track to materially outspend Disney on content”.

FINSUM: Netflix seems likely to remain both cheaper and offer more content for the foreseeable future, so the fears do seem overdone to us.

(New York)

Asset manager Guggenheim just put out a big call. The money manager’s strategists think that the economy is headed for a recession and markets are headed for huge declines. Their call is more interesting than the usual prognostications though. They point out that while this recession looks likely to be shallow because of a lack of underlying issues in the economy, the losses the market will suffer are likely to be severe. Scott Minerd of Guggenheim points out that “Our work shows that when recessions hit, the severity of the downturn has a relatively minor impact on the magnitude of the associated bear market in stocks”. Instead, it is the loftiness of valuations prior to the downturn that has a greater impact on how markets behave during a recession.

FINSUM: This argument makes total sense to us—there is no big fundamental problem with the economy, so a shallow recession, but equity prices are hefty right now, which means big losses.