What do the midterms mean for the US economy? ⚖️

- Plus: The potential relaxation of China's zero-covid policy could be poised to boost the country's equity markets 📈. Get the top GS intelligence below.  --------------------------------------------------------------- In today's edition: - Control of U.S. Congress hangs in the balance. [We assess how the midterm electionÂ]( affect the path of the U.S. economy. - Will [China's zero-covid policy]( finally come to an end?  - “My job as a leader is to make the people that work for me proud." - We have some words of wisdom from former military leaders on Veterans Day. (Was this newsletter forwarded to you? [Sign up now.]( --------------------------------------------------------------- US midterm elections: A divided government? While the final results from the midterm election are still being tallied, a divided Congress is the likely outcome, says Joe Wall, a managing director in our Office of Government Affairs. This result is a surprise because the incumbent party was expected to see “severe losses in the midterms” given the difficult climate, he says. “We're slightly adjusting a little bit, but it's basically a status quo outcome in terms of the division of the country,” he tells [Exchanges at Goldman Sachs]( host Allison Nathan. The possibility of a divided Congress could make things difficult for future government spending, fiscal policy or responding to a potential recession, according to Alec Phillips, Goldman Sachs Research's chief U.S. political economist. “When you have, what looks like, a divided Congress with very thin margins in both chambers, it can make things difficult to do,” he says. “A divided government just makes it less likely that they're able to get any kind of fiscal package or recession-fighting package done.” --------------------------------------------------------------- China's reopening could drive stocks up 20% A[ relaxation of China's zero-covid policy could boost the country's equity markets]( A full reopening could drive a 20% increase in Chinese stocks as restrictions are lifted, potentially adding $2.6 trillion to the equity market, according to Kinger Lau, Goldman Sachs' chief China equity strategist in macro research. “China reopening could be one of the most visible, long-awaited, and powerful upside catalysts for the market,” Lau says. Equally, a delay or failure to reopen could cause a 15% decline in Chinese stock markets, our strategists in GS Research say. Lau sees a growing number of signs the country could reopen in the second quarter of 2023: - The BioNTech covid vaccination was recently given approval for expats across the country after German Chancellor Olaf Scholz met with China's President Xi Jinping. - An inhalable vaccine could be rolled out across more provinces in China. - Flight data suggests international flights are expected to increase. - High-profile future international events, such as the Formula One race in Shanghai, have been scheduled next year. --------------------------------------------------------------- Goldman Sachs leaders travel to Ukraine Above (L to R): Ukrainian President Volodymyr Zelenskyy, and Goldman Sachs' Jared Cohen and John F. W. Rogers Last month, Goldman Sachs' John F. W. Rogers and Jared Cohen became the most senior people in the financial sector to visit Ukraine since the war began. They met with Ukrainian President Volodymyr Zelenskyy; ministers of defense, foreign affairs, economy, agriculture, and energy; the National Bank of Ukraine and the leading gas company; tech entrepreneurs; members of parliament; and civil society leaders. Here are a few of the observations they shared after their return: - Ukraine is looking to the private sector now, for confidence in both the war effort and the country's future. Zelenskyy's message was clear: “Without U.S. support, we cannot win.” While the U.S. has committed more military aid than any other nation by far, Ukrainians worry about the impact the U.S. election will have on future support. This makes engagement with the private sector all the more important. - Russian shelling and air strikes have damaged about 30% of Ukraine's energy infrastructure. Ukraine's energy minister told Rogers and Cohen that Russia's goal is to split the energy system before the winter. Due to recent attacks, Ukraine can no longer transport electricity from east to west, new rules require citizens to ration electricity, and electricity exports to neighboring states have ceased. - The Ukrainian tech sector has accelerated since the war began, becoming a hub of innovation for military and cybersecurity technologies that are being tested in real time. There are about 30 new drone companies, for example. “Every military contractor is here, even ones you have never heard of,” one entrepreneur told Rogers and Cohen. Looking ahead, the biggest challenges for Ukrainian tech companies will be bringing talent back and figuring out how to take what they have built during the war to scale in a global market. - Ukraine's goal is to have 80% of all new investments in recovery come from private industry. These will be targeted in four areas: - Technology - Building new energy facilities - Auctioning off state-owned assets like airports, roads and railways - Extracting steel, wood, and iron ore minerals for use in manufacturing --------------------------------------------------------------- GS marks Veterans Day with first-ever symposium [Today marks Veterans Day]( in the U.S. and Remembrance Day in the U.K. The firm honored its veteran community at the first-ever Goldman Sachs Veterans Symposium in New York. Nearly 250 veterans and 100 allies from across the firm heard from business, military and government thought leaders. Matt Gibson, the co-head of Global Technology, Media, and Telecommunications Group, led the “CEO Perspectives Panel” with executives across industries sharing personal stories of leadership and sacrifice. Above (L to R): Matt Gibson of Goldman Sachs, Scott Kirby of United Airlines, David McCormick of Bridgewater and Alex Gorsky of J&J - Alex Gorsky, executive chairman and former CEO of Johnson & Johnson, spent six years in the U.S. Army. Gorsky says traits that are honed during military service like grit and resilience are invaluable in leaders. “The subject matter expertise will come, but those core leadership values are really hard to find — and can't necessarily be taught,” says Gorsky. - Scott Kirby, CEO of United Airlines, who graduated from the U.S. Air Force Academy, says you learn leadership lessons from being around other great leaders. “Leadership is all about how you make people feel. And at the Air Force Academy, I didn't really realize that it was happening, but then it becomes second nature,” says Kirby. “My job as a leader is to make the people that work for me proud.” - “The humility to know I didn't know a lot, to ask lots of questions, rely on others, question myself and learn from the many mistakes…Those core attributes have really served me well through everything I've done,” says the former CEO of Bridgewater, David McCormick. That's a lesson he learned while serving in the Gulf War. “Keeping that humility and keeping that sense of it's not about you…it's the watchword for successful leadership whether it's in government or in business or in the military.” --------------------------------------------------------------- Going electric: Accelerating transition in India and Vietnam with blended finance With world leaders convening in Sharm el-Sheikh, Egypt, for COP 27, the Climate Innovation and Development Fund – backed by Bloomberg Philanthropies and Goldman Sachs – [announced it has completed its first set of blended-finance investments, focused on innovative electric mass mobility in India and Vietnam.]( By pairing philanthropic capital with private investment, blended financing can boost vital sustainable development. - In India, the Fund's investment will mobilize approximately 14 times its capital to support the purchase of 255 electric buses to replace existing diesel buses operating on 56 high traffic intercity routes across cities, including Delhi and Pune, and the states of Andhra Pradesh, Karnataka, Tamil Nadu, and Telangana. The e-buses are expected to serve five million people per year and include enhanced safety features for female passengers. The project expects to reduce ~15,000 tons of CO2 emissions per year. - In Vietnam, the Fund's investment will mobilize 44 times its capital to support the country's first electric bus fleet for public transport and the first national electric vehicle charging network. The project aims to build up to 140 e-buses and 150,000 charging ports across 2,000-3,000 stations throughout the country. --------------------------------------------------------------- BRIEFINGS brainteaser: How elections ripple through stocks Election results have been known to spook or stoke the stock market. Historically, when has the stock market been strongest during a U.S. president's four-year cycle? A) The first year in office B) The year preceding the midterm elections C) The year following the midterm elections D) The final year in office [Check the answer here.]( --------------------------------------------------------------- ICYMI: In the media [WSJÂ]( November 9 [Goldman Sachs' 80 new partners are the happiest people on Wall Street today]( [Bloomberg](  November 9 [The evolution of sustainable investing (15:17)Â]( [CNBC]( November 9 [Egypt needs a more general energy strategy, says Goldman Sachs]( (02:16) --------------------------------------------------------------- --------------------------------------------------------------- Some of the images used in this newsletter are sourced via Getty Images. The data provided in this newsletter is for information purposes only and should not be construed as investment or tax advice nor as a recommendation to buy, sell, or hold any particular security. 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