Goldman Sachs Says US Stock Rebound Driven by Hedge Unwinds, Easing Political Uncertainty

Goldman Sachs said the rebound in US stocks after the midterm elections was driven by the unwinding of hedge positions built before the vote and by easing political uncertainty.

BlockBeats reported on November 4 that Goldman Sachs linked the rally to investors unwinding defensive positions once the outcome of the US midterm elections became clearer. The bank also said the risk premium tied to political uncertainty declined as uncertainty eased, contributing to the rebound.

Goldman Sachs said valuations in the artificial intelligence infrastructure sector have already corrected substantially. Lower volatility in the near term could provide additional support for equities.

The bank identified data-center regulation as a factor to watch. Gina Hinojosa, the Texas governor-elect, has said she would freeze permits for new data centers until a regulatory framework is put in place to protect residents. If she follows through on that pledge, gigawatt-scale data-center capacity that had been scheduled to come online next year could be delayed until 2028.

Separately, Deutsche Bank on November 4 identified the US debt-ceiling issue, which could come to the fore in the second quarter of next year, as another major policy risk. The bank said whether Republicans can complete a debt-ceiling adjustment before the new Congress takes office in January next year will shape uncertainty around fiscal policy.