Goldman Sachs: Short Into The Election; Eyeing Lockdown Risk

Goldman Sachs "continue to see favorable risk/reward in dollar shorts into November event risk: vaccine confirmation would boost global growth expectations, and we believe a "blue wave" election scenario would favor pro-cyclical currencies as well. Over the past week election polling, probabilities from prominent public models, and odds implied by event prediction markets were little changed; vaccine news was mildly disappointing as Pfizer confirmed on its earnings call that it will not have Phase 3 trial information until after the election. We therefore think the short-term dollar outlook has not changed materially. However, looking further ahead, the specter of winter COVID lockdowns does present risk to pro-cyclical trades in general, including Dollar shorts. We think investors would look through a temporary pullback in activity if a safe and effective vaccine were confirmed - because we could have a high degree of confidence that activity would rebound soon. But until that point it will be important to monitor case growth and hospitalizations across major economies; evidence that new restrictions in Western Europe were curbing new infections would be an encouraging sign."