Interview, Other
Why US Stocks May ‘Grind Higher’
- Goldman Sachs co-head of global banking and markets Ashok Baradhan forecasts equities will continue to "grind higher," citing a V-shaped recovery in tech following a significant momentum drawdown and S&P 500 reaching all-time highs.
- The July market volatility was driven by a convergence of re-escalated war tensions, nervousness regarding potential Fed rate hikes, and the unwinding of leverage in AI-centric trades.
- While single-stock volatility relative to index volatility remains stretched in 2026, Baradhan expects extreme dispersion to moderate as the market stabilizes, despite the AI theme affecting companies differently based on their role in the supply chain.
- Baradhan diverges from market pricing regarding the Fed, arguing rates will stay on hold through the end of the year rather than seeing the priced-in hikes, citing that inflation drivers like tariffs are receding.
- He asserts that while AI infrastructure build-out may cause short-term resource pressure, the eventual completion of this infrastructure will be "fairly disinflationary" long-term.
- Baradhan remains constructive on the credit market outlook, noting that despite increased supply, tight spreads reflect the underlying economy's resilience and a low realized expectation of defaults.
- Regarding currency volatility, he dismisses short-term interventions (such as the recent yen stabilization) as ineffective, arguing that sustained yen stabilization requires the Bank of Japan to normalize interest rates properly.
- His primary trade recommendation is to "stay invested," anticipating a decline in energy prices to below $70 per barrel by year-end, which he believes will support U.S. front-end yields and overall market participation in productivity gains.
- The firm advises continued exposure to the market, noting that strong growth fundamentals and earnings season performance support the thesis that markets are headed higher into Europe.
- Moving forward, Goldman Sachs will prioritize monitoring upcoming U.S. jobs reports and inflation readings to validate the current outlook.