The bank cited “the rapid and broad-based resurgence of the coronavirus” as the main reason it was downgrading Q4 and Q1 GDP forecasts. Goldman now expects +3.5% and +1.0% annualized growth in Q4 and Q1 (+4.5% and +3.5% previously).

Indeed, the worry is that as too many travelers in the U.S. ignore Thanksgiving COVID recommendations from the CDC and keep plans to mix and mingle with extended family, we’ll see cases continue to rise from their already staggeringly high levels. Then that will lead governments to reinstate regulations that curtail economic activity.

The resulting crackdowns may vary geographically, however. “We expect the largest hit in the Northeast, where lower temperatures will likely mean a larger virus headwind and where policymakers have indicated more willingness to impose restrictions, and the smallest hit in the South. We expect sequential declines in consumer services spending over November through January, and now see -1.0% annualized real consumption growth in Q1,” the analysts wrote.

Meanwhile, the outcome of any stimulus deal now seems to hang on the two Senate races that are heading to a runoff in Georgia. Should the Democrats capture both seats, and thus control the chamber thanks to the tie-breaking vote of Vice-President elect Kamala Harris, most economists see a big package, including another round of $1,200 direct payments. But if Republicans retain control they have long been partial to a much “skinnier” package which is not likely to include checks for individuals.

Goldman’s analysts had earlier cautioned that failure to reach a “fiscal agreement by the end of Q1 or widespread and more stringent virus restrictions could lead to outright contraction in Q1.”

But it’s not all bad news. Goldman analysts also predict that the “larger drag in the winter should imply an even larger reacceleration on the back of mass immunization. We have thus increased our Q2 and Q3 growth forecasts to +9.5% and +7.0%, respectively (vs. +7.0% and +6.0% previously).”

That may be one reason the bank remains quite bullish when it comes to the stock market. As my colleague Bernhard Warner wrote this morning in his Bull Sheet newsletter, “Goldman calculates the S&P 500 will close this year at 3,700, up roughly 4% from the Friday close. As for 2021, it will rise a further 16% to top 4,300.”