Goldman Sachs: Midterms Seen Having Limited Macro Impact
The midterm elections are not expected to materially change the economic outlook through 2028, given limited scope for major legislation. Fiscal deficits are seen remaining around 6% of GDP, with higher defence spending under a Republican sweep the clearest upside risk. The larger downside risk is tighter regulation of data centres, particularly at the state and local level. Attention next week turns to the October jobs report alongside ISM surveys, JOLTS, ADP employment and other labour-market data. Following the Fed’s October hold, the expected tightening path has been pushed out to 25bp hikes in December 2026 and March 2027, leaving the terminal rate forecast unchanged at 4.25%-4.50%. Rates are then expected to remain at that level through end-2027, although there is still a risk the slower pace leaves the Fed behind the curve and requires an additional 25-50bp of tightening.
The midterm elections are not expected to materially change the economic outlook through 2028, given limited scope for major legislation. Fiscal deficits are seen remaining around 6% of GDP, with higher defence spending under a Republican sweep the clearest upside risk. The larger downside risk is tighter regulation of data centres, particularly at the state and local level. Attention next week turns to the October jobs report alongside ISM surveys, JOLTS, ADP employment and other labour-market data.
Following the Fed’s October hold, the expected tightening path has been pushed out to 25bp hikes in December 2026 and March 2027, leaving the terminal rate forecast unchanged at 4.25%-4.50%. Rates are then expected to remain at that level through end-2027, although there is still a risk the slower pace leaves the Fed behind the curve and requires an additional 25-50bp of tightening.