GS Privorotsky Basics Back to School. LME Copper Break Out. Super El Nino 8 Sep 2026

GS Privorotsky - Basics Back to School. LME Copper Break Out. Super El Nino 8 Sep 2026 Rich Privorotsky · Goldman Sachs · Managing Director, FICC & Equities Tue 8 Sep 2026, 3:11am ET

Markets: Back to school, but hardly a quiet start. Asian tech and semis rallied as GPT-6 momentum continued to build (Softbank approx +30% in 3 days). The bigger surprise has been the yen’s sharp appreciation. Stronger Japanese wage data overnight reinforces the case for further BOJ tightening. Think raises some questions about yen carry trade unwind and the impact to global assets… particularly equities and credit. No surprise Japanese exporters underperforming as they are the intersection of a stronger currency and higher energy prices.

Energy: Remains the biggest tangible risk to equities. Iran’s proposed exclusion zone could constrain ship to ship transfers. Vitol's Hardy puts Hormuz flows at roughly 10m barrels a day, mostly crude, but warns that product markets remain tight. Shanghai crude futures have been outperforming, raising the question if China has returned to the market as the marginal buyer (having meaningfully reduced apparent demand in early to mid summer). Some grounds for optimism on diplomacy: Iran says discussions with Oman are nearing agreement, although that is not yet an operational solution or a broader US deal. The incentives favor compromise now… Washington needs time for lower energy prices to feed through before political deadlines, while Tehran risks losing that source of leverage afterwards. Incentives are there but limited tangible progress so far…

Russia/Ukraine: Another risk for Europe. Moscow is closing Germany’s St Petersburg consulate following the dispute over the attempted Leipzig drone attack. Separate sabotage investigations around German infrastructure add to the concern, although attribution needs care. Russia’s national parliamentary and regional elections culminate on 20 September, with Duma voting running 18–20 September. Worth watching for any change in escalation around that window.

Copper: Quietly making new LME highs despite the stagflation concerns. Supply constraints and tariff driven distortions are part of the story, so this is not purely a clean growth signal. Still, it fits the broader view: a spending heavy, late cycle economy in which equities and commodities can keep working until energy or rates rise enough to break demand. The question is what stops the spending, not simply whether the Fed hikes.

Bonds: Holding pattern. 3yr auction today, with the Treasury buyback announcement tomorrow (will it be >$4bn?). PPI on Thursday, and CPI on Friday are the main macro tests. Not expecting the 3yr alone to change much.

Fed: Correction to yesterday: the roughly 60bps of hikes priced was through June 2027, not year end. That said, conclusion doesn't really change as pricing already captures most of a hypothetical three hike cycle. Don't get me wrong the inflation data at end of the week is quite binary locally and we have some room to

price from 2.4 to 3 hikes (wont be good on the day). That said, unless inflation is genuinely hot, I struggle with the idea of a huge additional repricing. This still looks more like credibility hikes as opposed something intended to derail the spending cycle. A hike could produce a painful dip at end of week, but I would still lean towards buying it if the AI narrative remains intact.

Risk: The bigger threat is an energy breakout with no diplomatic off ramp. That is the scenario in which I would be much less comfortable with risk. TMT conferences should give us a better read on whether spending intentions are still rising or beginning to level out. GPT-6 looks like a meaningful step forward, which should support the AI opportunity. Today brings AMD, SNDK and SMCI, CSCO, VRT, NBIS and CRWV at various conferences (including our own). NFIB is also worth watching, particularly hiring intentions.

Higher Barriers to Trade, Lower Barriers to Shocks: Hormuz, Black Sea and a Super El Niño

Source: Goldman Sachs FICC & Equities, as of 8 Sep 2026.