GS Mourad post Fed what's working what's not working

GS Mourad - post Fed what's working what's not working 17 Sep 2026 Faris Mourad · Goldman Sachs · Vice President, Global Banking & Markets, FICC & Equities Thu 17 Sep 2026, 4:47pm ET

In 30 minutes the Fed Chair Warsh and the Fed surprised the GS economists hawkishly with (1) a two- hike base case: 16-2 majority projected at least one more hike this year with no dissenting votes against yesterday’s hike, (2) the median funds rate projection remained quite elevated through 2029 with median neutral rate dot rose from 3.06% to 3.25%, and (3) Chairman Warsh described the hike as having “removed a dose of accommodation” three times (link).

It has been challenging for investors to position themselves against the uncertainty of the war, the upcoming midterm election, AI decision makers slowing down the pace of AI development, and the Fed’s decision. It is still early to tell, but so far the market seems to be appreciating a slightly less uncertain environment.

Our view: we like going long diversified health care (GSXUHLTH) considering it is the least correlated sector to AI, oil, and rates – the correlation is closer to zero rather than negative, while showing strong positive earnings revisions, especially within pockets of commercial biotech (GSHLCOMB).

What’s not working? Cyclicals excluding energy, commodities, and semiconductors are underperforming defensives (GSPUCYDE) since the summer, breaking the 200-day moving average. This is our most frequently traded hedge in an uncertain/decelerating environment. The debasement theme is not working similar to last year. Gold miners (GSXUGLDM) are up just as much as the S&P 500 ex AI (SPXXAI). Around ~one year ago, we highlighted a bullish 2026 as central banks likely to continue the structural diversification of their reserves into Gold. Also unlike last year, speculative themes with no AI exposure such as autonomous vehicles (GSXUSELF), nuclear tech (GSXURANI), or quantum computing (GSX1QNT1) continue to lag as AI theme reward investors more with stronger fundamentals. Housing and consumer themes are making new lows with oil and rates higher for longer, and consumer sentiment near five-year lows. Independent power producers and the AI Power theme are lagging other AI hardware themes as a result of the policy noise associated with inflation of electricity prices in the US.

Where to from here? Events with binary outcomes are challenging: in a scenario where we see significant de-escalation of the US-Iran war, we expect consumer discretionary to lead the outperformance of the

broadening trade in anticipation of lower oil and rates. The homebuilders basket (GSXUBLDR) is our favorite implementation in that scenario. Until then, we remain confident in secular themes with low sensitivity to the current economy: AI. If the AI space continues to unwind, the momentum rotation will continue, as we are already experiencing in the short-term 3-month momentum pair (GSPRHMO3). Otherwise, the top performing themes this year continue to be within AI hardware (GSTMTDAT), even though the group has experienced one of the strongest periods of pessimism since the launch of ChatGPT.

* Q2 earnings season delivered stellar results, with stocks involved in the AI infrastructure build-out continuing to boost S&P 500 profit growth. Earnings for the hyperscalers and the AI infrastructure companies benefiting from their capex spending increased by 54% year/year in Q2, accounting for about 50% of S&P 500 EPS growth during the quarter. However, earnings growth for the rest of the market has also been strong and accelerating. Excluding the Energy sector profits that were boosted by higher oil prices, the rest of the S&P 500 posted year/year EPS growth of 14%.

US WEEKLY KICKSTART - What Q2 earnings reports signaled about the state of corporate AI adoption

* Stocks involved in home construction are one of the most direct ways to express a view on long-term interest rates within the equity market. The sensitivity of homebuilders (GSXUBLDR) to interest rates has been relatively stable over the past few years, and the stocks have been relatively insensitive to the broad macroeconomic growth outlook. Housing stocks have traded in…