Taxes and election-related risk in US stocks: Goldman Sachs By Investing.com

Goldman Sachs strategists have highlighted potential tariffs on US companies doing business overseas as the US election campaign heats up. According to the investment banking giant, prices can have a significant impact on the performance of stocks with high exposure to international income.

“Tariffs will create a headwind for stock performance with higher exposure to international income due to the risk of retaliatory tariffs, as well as an increase in international tensions,” strategists said in a paper on Friday.

This concern extends to companies that rely heavily on international suppliers, who may face additional challenges from potential costs.

Goldman Sachs noted that the prediction markets currently indicate a higher probability of a Trump presidency compared to a Biden presidency. They also emphasized the uncertainty surrounding the size and scope of potential tax increases but pointed out that such increases appear likely if Trump wins.

“While there is considerable uncertainty about the size and scope, a tax hike appears likely in the event of a Trump victory,” the note added.

The outcome of the US presidential election is expected to have a significant impact on the US dollar and the relative performance of domestically exposed firms compared to internationally exposed firms.

In 2018, when the US announced tariffs and other trade barriers against China under the Trump administration, Goldman Sachs noted that their domestic sales basket exceeded the international sales basket by 9 percent.

Strategists suggest that investors should closely monitor the development of the election and look for shares of companies with large exposure to foreign countries.