There is less than a 20% chance of a post-election bear market as an upbeat economy drives stocks higher, Goldman said.

• According to Goldman Sachs, there is only an 18% chance that stocks will enter bear market territory after the election.

• Analysts say a healthy economic backdrop will help stocks digest higher bond yields.

• Analysts say higher yields represent a risk for stocks and are more likely if Trump wins the election.

Investors may be nervous about election-related volatility, but the market is in good shape to avoid a sharp fall into bear market territory after the vote, Goldman Sachs said.

Analysts said they see only an 18% chance the stock will fall more than 20%, which would signal the start of a bear market. They point to the continued health of the economy, which has helped stocks rise this year.

“Despite recent weaker macroeconomic data (due in part to strikes and hurricanes last month), a favorable macroeconomic backdrop in the U.S. should limit the risk of a bear market,” analysts said in a note Monday.

They said that even if bond yields rise significantly after the election, stocks should continue to do well, although a faster rise in bond yields or real yields could pose more of an outsized risk.

“Stocks should be able to absorb higher bond yields as long as they are driven by faster growth. However, rising bond yields could eventually become a speed limiter for equities if real yields start to rise (relative to expectations for real GDP growth) or if bond yields rise too quickly,” analysts said.

Analysts and economists say higher bond yields, which are a headwind for stocks, probable if Trump wins. His proposals for higher tariffs and mass deportations would be inflationary and could make it difficult for the Federal Reserve to continue easing monetary policy.

On the other hand, a Harris victory in a split Congress would likely push bond yields lower, analysts say.

The Central Bank presented sharp reduction in rates in September and widely expected cut by 25 basis points following Thursday’s meeting.

The path for the easing cycle after that is less clear, with some strategists warning the Fed could hit pause on rate cuts in December or early next year. although some still see the possibility of another significant rate cut as the economy is slowing down And labor market weakens.

Goldman analysts said stocks are still able to absorb the rise in bond yields. Their call for stocks to avoid a bear market comes as the S&P 500 is up more than 21% this year and the bull rally turned two years old last month.

Vice President Kamala Harris and former President Donald Trump remain practically connected in the final polls. Investors are preparing for elections market volatility if the voting result is unclear for several days.

Read the original article at Business Insider