Goldman Sachs has expressed that global investors are overestimating the risk of uncertainty in financial markets due to potential delays in the results of the upcoming U.S. presidential election. According to a report by Goldman strategists Michael Cahill, Lexi Kanter, and Alec Phillips, the market participants seem to be overestimating the likelihood that the delay in election results will prevent the financial markets from digesting potential outcomes promptly.
Several factors support Goldman Sachs' viewpoint. Firstly, state and national polls show neck-and-neck results, which can obscure significant differences in the Electoral College. Furthermore, the strategists note adjustments in how states handle ballots since the pandemic, suggesting a faster tally compared to 2020.
Referencing the last two elections, Goldman observed that most foreign exchange market fluctuations occur at the start of the Tokyo trading session as preliminary voting results are announced. The bank highlights that early results primarily drive exchange rates, focusing on key county results rather than overall vote counts.
The strategists pointed out that in both 2016 and 2020, the majority of forex volatility happened in the initial hours following result announcements. While volatility remained high during the London trading session, it generally returned to 'normal' by the afternoon of the day after the U.S. election in New York trading.
