Goldman Sachs Sees Year-End "All-Asset Rally" Conditional on Oil Price Drop, US Midterms

Goldman Sachs said Sept. 20 that a broad year-end rally across stocks and bonds depends on two conditions: a smooth US midterm election outcome and a significant pullback in oil prices. Lower crude would cool inflation expectations and ease Federal Reserve rate pressure, potentially opening room for cuts, the bank said. Goldman's base case assumes Middle East geopolitical tensions ease by Q4 2026, shipping normalizes, and Brent crude holds at $80 per barrel. It forecasts the Fed cutting rates in the first half of 2026, with a full-year reduction of up to 75 basis points. Analyst Jeff Currie, a former Goldman commodities strategist, warned US gasoline could hit $5 per gallon before the November midterms, with diesel at $7 to $9. Should Strait of Hormuz disruptions persist into 2027, Brent could exceed $120 per barrel. Goldman strategist Ben Snider cautioned that US equities may feel midterm-related pressure starting in August. Historically, the S&P 500 has averaged 0% returns from early August to election day across 13 midterm years since 1974, followed by roughly 6% gains in the subsequent three months.