The world could look very different to investors in three months

A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here

As investors carefully scan an uncertain horizon, one thing is clear: The backdrop for markets will look very different in three months’ time.

In a note to clients this week, Goldman Sachs strategists including Kamakshya Trivedi predicted a “substantially different landscape” by December.

They pointed to three potential developments:

On reopening schools, Goldman Sachs expects a “bumpy process” characterized by “some false starts,” especially in the United States. That could hang over markets, particularly in September.

“The evidence so far suggests that there is a path to reopening schools without prompting a sharp increase in virus spread,” the investment bank said. “But those examples have generally been in places where transmission has been very low and where strict protocols have been followed.”

The passage of the US election will also provide investors with greater clarity, particularly regarding the relationship with China. Goldman Sachs thinks that decoupling between the world’s two biggest economies is poised to continue no matter who wins, though Joe Biden would be less likely to employ tariffs.

Most importantly, Goldman Sachs thinks there’s a “good chance” that at least one vaccine will be approved by the US Food and Drug Administration by the end of November, allowing it to be “broadly distributed” by mid-2021.

“This kind of timeline could see a substantial boost to GDP relative to a ‘no-vaccine’ case, particularly for the US, which is likely to lead the vaccine race and is likely to experience worse outcomes than in Europe without a vaccine,” the bank’s strategists said.

They predict the S&P 500 will end the year around current levels, but see the potential for the index to shoot up another 11% if a viable vaccine comes into play.

What it means: The picture for investors is murky this summer, with little transparency on the path of the virus or upcoming rounds of stimulus spending. But Wall Street thinks some clouds could clear before year-end.

“We’re at a crossroads,” Thomas Lee, cofounder of Fundstrat Global Advisors told my CNN Business colleague Alison Kosik on Wednesday.

If it becomes evident that the virus has peaked in the United States and the surge of cases in the Sun Belt has been brought under control, investors should go on the offensive, he said.

Of course, nothing is a given. In three months, the situation also could look materially worse, with cases rising in new parts of the United States. There are also growing concerns about a second wave hitting Europe and Asia.

What Microsoft’s long history in China means for TikTok

Microsoft (MSFT) has spent decades building goodwill with Beijing. That could help its bid to buy TikTok’s operations in the United States and a few other countries — that is, unless deteriorating US-China relations get in the way.

A pedestrian wearing a protective mask walks past a Microsoft Technology Center in New York, on Wednesday, July 22, 2020.

Related article Microsoft has a long history in China. That could cut both ways for TikTok

Microsoft has emerged as the leading candidate to save TikTok from President Donald Trump’s threat to ban the app unless it finds an American buyer. The app is owned by Beijing-based ByteDance. A deal would give Microsoft ownership and operation of TikTok services in the United States, Canada, Australia and New Zealand.

Unlike other big US tech companies, Microsoft has major clout in China, and its products have a significant presence there, my CNN Business colleague Sherisse Pham reports.

The backstory: Microsoft has been in China since 1992 and employs 6,000 people in the country. Its software is used by the Chinese government and companies, and LinkedIn is a popular social media platform for Chinese professionals. Bing is the only foreign search engine with any market share.

The Washington-based company also boasts an A-list alumni network in China, thanks to the hugely influential Microsoft Research Lab Asia, or MSRA.

Many founders and senior executives at companies such as Alibaba, smartphone maker Xiaomi and e-commerce upstart Pinduoduo got their start at Microsoft and were trained at MSRA. Even Zhang Yiming, the founder and CEO of ByteDance, briefly worked at Microsoft before reportedly leaving out of boredom.

That said: Some Trump administration officials are suspicious that Microsoft is too cozy with Beijing. Microsoft-owned products such as Bing and Skype have enabled Chinese surveillance and censorship, White House trade adviser Peter Navarro said in an interview on CNN Monday.

Watch this space: Tensions over technology keep rising. US Secretary of State Mike Pompeo on Wednesday urged American companies to remove “untrusted” Chinese-owned technology from their digital networks, detailing a broad plan aimed at dramatically curbing China’s reach.

Nintendo knocks it out of the park

Sales of video games continue to skyrocket during the pandemic, and Nintendo (NTDOF) is cashing in big time.

The latest: The company said Thursday that net sales shot up 108% between April and June compared to the same period last year. Operating profit soared an eye-popping 428%.

Sales of Switch gaming consoles and the popular “Animal Crossing: New Horizons” game continue to power earnings. Nintendo said it has now sold 22.4 million units of “Animal Crossing” since the game launched in March.

“Sales of this title continue to be strong with no loss of momentum, contributing greatly to the overall growth in software sales,” the company said in its earnings release.

That’s not all: Zynga (ZNGA), which brought the world “FarmVille,” is also thriving. The company raised its full-year earnings guidance on Wednesday.

“With so many of us staying at home, we saw heightened levels of player engagement, social connection and monetization in our portfolio,” the company said in a statement. Shares are up more than 5% in premarket trading.

Up next

Hilton (HLT) reports results before US markets open. Booking Holdings, Caesars Entertainment (CZR), Datadog (DDOG), Uber (UBER), Yelp (YELP) and Zillow (Z) follow after the close.

Also today: Initial US claims for unemployment benefits for the week ending August 1 are expected to come in at nearly 1.42 million. That would be slightly lower than the number of claims received during the previous week.

Coming tomorrow: How did the US job market fare during July?