GS Pasquariello markets macro

GS Pasquariello - markets / macro 21 Sep 2026 Tony Pasquariello · Goldman Sachs · Managing Director, FICC & Equities Mon 21 Sep 2026, 12:55am UTC (Sun 20 Sep 2026, 8:55pm ET)

I haven’t had a particularly strong directional bias of late, while thinking the path would be a tricky September / October, followed by a strong November / December.

when working on this note, I ended up in the same general place, but with a bit more conviction that the balance of risk favors the bulls.

here’s one way to frame it: a lot has been thrown at the US equity market over the past few months ... yet, once again, it has rolled with the punches ... and S&P is less than 2% away from taking out the highs.

what follows from here is a set of thoughts from the weekend reading that led to those views:

1. Kevin Warsh and the FOMC did what they needed to do. on the follow: the back end settled in, inflation breakevens tightened, equity volatility compressed and long duration stocks outperformed. so, here’s the pattern of fact: hopes of a one-and-done tightening cycle were vanquished this week, but in response, financial conditions actually got easier.

2. for the avoidance of doubt, any tightening cycle needs to be taken seriously, particularly when certain rate-sensitive parts of the economy are really struggling (e.g. housing, the low end consumer). in addition, as a student of market history, I typically don’t believe in fighting the Fed. with that said, the bond market has already done a lot of work, which the stock market is well aware of -- in that specific interplay, the setup today is better than it was just one month ago.

3. I admit to wrestling with that last paragraph. when working through it, this argument from Dom Wilson on the podcast carried some weight: “at four [hikes] priced, if you ask me ... more likely two, or more likely six ... I'm going to tell you much more likely two. so, we've put in real premium against a proper cycle, and the skew of risks is that [the Fed] underdelivers, which is the house view.” we hit this point on the very front end of the conversation: linked note.

4. I’ll register one more item on today’s setup. as a general observation -- particularly with regard to trading community -- price drives sentiment. now consider this: S&P is tracking for a fourth straight year of double digit returns ... market breadth has improved ... certain popular parts of the market have had an excellent year (e.g. SOX +68%) ... yet, several off-the-shelf measures of investor sentiment are unequivocally downbeat (e.g. AAII bulls-vs-bears, CNN fear / greed or the GS sentiment indicator).

5. I’m not saying that the past three months have been easy -- if anything, the yards have been particularly hard beneath the hood of the index. rather, the point I’m trying to make is this: within a secular trend that’s been remarkably good for stock operators, the levered community is notably wary right now, and positioned accordingly (for example, net exposure across our full PB book measures in the 34th percentile of the past year).

6. for the sake of balance, we should spend a minute on the challenges to US equities. I’ll start with the biggest inconvenient truth: energy prices continue to rise as inventories continue to fall, and time is still the enemy. in turn, this pressure has contributed to the melt higher in global bond yields. while the stock market moved on from the SoH nearly six months ago, Iran is an ongoing headwind -- and one that carries with it some open tail risks.

7. given that around 70% of US GDP is comprised by consumption -- and given that the fiscal impulse has waned following tax return season -- one needs to also seriously consider the deleterious compounding effects of higher commodities and higher interest rates. in plain English: if a tank of gas costs $4.50 ... and if a 30-year mortgage is priced at 7% ... the risk is US households become increasingly infuriated.

8. so, depending on how one plies their craft, I’d argue the last two paragraphs have direct implication for portfolio construction: core length in equities should be married with trading length in commodities (the indices continue to do their job) and options on higher…