Goldman Sachs: The Markets
2026-08-24 · Hosted by — · Goldman Sachs
Executive Summary
Chris Hussey speaks with Sean Titasia, who oversees Goldman Sachs' ETF and Custom Baskets vol trading business, about why US equity returns are broadening beyond AI stocks even as the S&P sits near all-time highs. With roughly 92% of Q2 earnings reported, 64% of companies have beaten estimates by more than one standard deviation — one of the highest beat rates on record — pushing 2027 consensus S&P EPS estimates toward $390-400. Despite this, AI-adjacent names that beat estimates have actually underperformed the S&P by 130 basis points the day after reporting, a sign Titasia calls "healthy" skepticism about when AI earnings growth peaks.
Key Stories & Changes
1. Record Earnings Beat Rate Driving the Rally
92% of S&P companies have reported Q2 results; 64% beat estimates by more than one standard deviation, one of the highest beat rates on record
2027 consensus EPS estimates have risen about 2%, implying a consensus $390-400 EPS for the S&P 500
Nine of eleven S&P sectors posted double-digit year-over-year earnings growth
Despite strong beats, AI-adjacent names that beat have underperformed the S&P by 130 basis points the following day — a sign of skepticism about peak AI earnings growth, which Titasia calls a healthy dynamic
2. Market Broadening Beyond Mega-Cap Tech
The equal-weight S&P has outperformed the cap-weighted S&P by almost 300 basis points year-to-date
Median stock earnings growth of 14% year-over-year, the largest increase since the post-COVID recovery
Three drivers cited: declining macro uncertainty (private credit fears, AI-driven unemployment fears, and peak geopolitical/oil-price uncertainty have all eased), previously "written off" sectors like software and healthcare proving out strong fundamentals, and extreme AI-trade volatility pushing investors to de-risk into other sectors
3. Volatility Compression and Cheap Index Hedging
VIX has fallen from about 21 at the end of July to 15
July's volatility was concentrated at the sector level (especially within AI sub-themes: power, memory, optical networking, liquid cooling, semis), which moved together on a vol-adjusted basis but have shown more differentiated bounces in August
Implied correlation across the index is near all-time lows, making S&P-level options historically cheap for hedging or expressing directional views
Prime book net buying is at its highest level since COVID, suggesting broad-based buying across sectors rather than concentrated positioning
4. Macro Watch List: Oil, Rates, and the Fed
Rising oil prices are cited as pressuring the back end of bond yield curves
Global bond supply pressure flagged across three regions: US hyperscaler capex funding, European defense spending, and Japanese fiscal expansion
Treasury's announcement of expanded buyback programs helped stabilize back-end yields over the two days preceding the taping
Goldman Sachs research flagged a potential H2 economic slowdown versus H1 2026
5. Favored Trade: Consumer Experiences
Consumer spending on "experiences" (live sports, theme parks, concerts) has risen from about 1% of Q1 2025 spending (versus 2% for the broader services category) to 6% as of Q1 2026
Sector trades around 17x earnings, well below its six-year median average
Framed as under-owned, undervalued, and largely immune to AI disruption risk
Trends Identified
1. Broadening Driven by Reduced Macro Uncertainty
Titasia explicitly links the equal-weight S&P's outperformance to declining uncertainty across multiple fronts simultaneously (private credit, AI disruption fears, geopolitics, oil prices), arguing markets structurally broaden when the number of open macro question marks declines — a dynamic that could reverse quickly if new uncertainty emerges.
2. AI Trade Fatigue Coexisting with AI Fundamentals Strength
Even as AI-adjacent earnings remain strong, the day-after-earnings underperformance pattern suggests investors are increasingly discerning within the AI trade rather than buying it indiscriminately — rewarding sub-themes like memory differently from optical networking or liquid cooling based on visibility into long-term contracts and capital return plans.
3. Jackson Hole as the Key Inflection Point for Broadening's Durability
Titasia frames Fed Chair Warsh's first Jackson Hole address as pivotal: if the Fed signals a hiking bias, capital could quickly rotate back into the perceived safety of the AI trade, unwinding the current broadening dynamic. ---
Sentiment Analysis
Overall Market Sentiment: Constructively Bullish
Titasia expresses genuine optimism about the sustainability of market breadth, grounded in concrete earnings and volatility data, while flagging the Fed as the key swing factor.
Risk Factors Highlighted
Jackson Hole/Fed policy reversal risk: A hawkish surprise from Fed Chair Warsh could quickly reverse the equity market broadening trend back toward concentrated AI leadership.
Global bond supply pressure: Simultaneous funding needs from US hyperscaler capex, European defense spending, and Japanese fiscal expansion are pushing up long-end yields globally.
Rising oil prices: Cited as a factor creating renewed pressure on the back end of bond curves.
Potential H2 economic slowdown: Goldman Sachs research flagged a possible deceleration in growth relative to H1 2026, a key variable for whether current earnings momentum can continue.
AI trade earnings-growth skepticism: The pattern of AI-beat stocks underperforming the index the following day signals the market may be nearing peak expectations for AI-linked earnings growth.
This episode was covered in today's [The Market Signal — 2026-08-24](https://marketsignal.beehiiv.com/p/the-market-signal-2026-08-24), a cross-source synthesis of multiple podcast reports.