GS Privorotsky GS Basics

GS Rich Privorotsky - GS Basics Competing for Capital. Global Rates. PE Loans 18 Aug 2026 Rich Privorotsky · Goldman Sachs · Managing Director, FICC & Equities Tue 18 Aug 2026, 2:20am ET

Oil/Rates: Markets lower on rates yesterday and oil squeezing again this morning. Another vessel was hit exiting Hormuz and traffic remains a trickle… rhetoric has deteriorated and neither side looks particularly close. My alternative thesis from yesterday feels like it is strengthening: rates are increasingly a supply problem, not necessarily a central bank discipline problem. Short term data has been softer and the front end has outperformed, but you cannot escape the hard facts… massive sovereign deficits alongside potentially >$1tn of annual AI capex, increasingly funded through debt markets. That is a lot of paper. Real rates need to clear it. At some point the Fed may even be forced to hike into weaker data to flatten the curve/re-anchor the back end…

Equities: This should ultimately show up through multiples. If the market is trying to force either the public or private sector to spend less, realistically the adjustment falls more heavily on the private sector. Governments rarely volunteer austerity. So higher real rates + huge public/AI capital demands = some degree of crowding out elsewhere. That feels like part of the de-rating we are already seeing in the broader market (price u/p EPS revisions).

Politics / Fiscal: Trump approval just hit 33%, the low of this term and tied with his prior term low. Democratic control of both chambers is now roughly a coin flip on Polymarket (most likely scenario), Surprising given where things stood a few months ago, but an unpopular war + higher gasoline is clearly biting. There should ultimately be some reflexivity here… I still struggle with a sustained right tail oil outcome because as prices have risen we have always seen a policy response (unilateral deal extension by end of week?). The more interesting medium term read through is bonds. A dem sweep at mid term probably means more pressure for healthcare/social spending (that Trump doesn't pushback on). Note AOC now narrowly favorite on Polymarket odds for 2028 Dem nominee.

Global Rates: This is increasingly global. The front ends can rally on weaker data while the long ends remain under pressure. France looks particularly difficult heading into the 2027 election… high debt, rising interest costs and very limited political appetite for restraint. Japan may be the cleanest version of the same problem. You are trying to have a growing economy/equity market, stable currency, expansionary fiscal policy and a stable bond curve simultaneously… increasingly mutually exclusive. JGB 10s are now around 2.94%, a three decade high, with the market increasingly pricing faster BOJ tightening. The painful answer is probably a more aggressive BOJ, but politically and structurally that is hard after three decades spent escaping deflation. Slowly boiling the savers was always easier…(all paths back to nominal assets)

Consumer: This week’s retailer numbers matter. Home Depot today, Target/Lowe’s Wednesday, Walmart Thursday. My base case remains K-shaped… high end fine, low end struggling. More interestingly, the

non-AI economy may be losing some prior tailwinds. Fiscal impulse was front loaded, the post-tariff inventory rebuild has largely happened, and some demand was pulled forward. Meanwhile an extraordinary amount of global capital is being absorbed by AI spending. Consumer stocks globally already feel pretty soggy (WMT/SPX ratio not far from 52 week lows...just look at LVMH or NKE or ADS)… not a lot of great stuff happening outside the spending economy. Only so much capital in the world and apparently all of it wants to build a data centers… less money for sneakers.

Risk: Expiry should remain an anchoring force for equities in the very short term. Rates are at a critical juncture and the most obvious lever available to the administration is still energy… if oil really went above $100 the backdrop for risk becomes more challenging. Otherwise I still think some version of economically rational reflexivity eventually appears. July minutes Wednesday...what I want…