GS Privorotsky GS Basics China Events Fed Priced Reductionist Rate View

GS Privorotsky - GS Basics China Events Fed Priced Reductionist Rate View 16 Sep 2026 Rich Privorotsky · Goldman Sachs · Managing Director, Global Banking & Markets 16 Sep 2026

Markets: Markets chopping around after a lackluster bounce yesterday. Asia (as has been consistent) continues to trade better...Asia Memory +3%, Asia

Markets: Markets chopping around after a lackluster bounce yesterday. Asia (as has been consistent) continues to trade better...Asia Memory +3%, Asia AI bottlenecks +2.5% and Japan Optical +2%. Given how far AI semis/hardware have already de-rated, it’s difficult to see a huge amount of fundamental downside without another leg to the story. The issues are pretty simple… politics, rates and macro.

Fed: The 25bp hike is almost a non event now (priced at 93%)...the bigger question is whether the Fed validates the hiking cycle that has rapidly been put into the curve. Futures are now pricing roughly 3.5 hikes through next summer. GIR: "The key question for the meeting is whether the median dot will show one hike or two in 2026. We expect a 10-8 majority to show one hike because some participants might be ambivalent about the first hike and some might want to avoid pushing market expectations any higher." . Warsh has deliberately given very little forward guidance, so I’m more interested in the reaction function than the hike itself… does he frame this as a response to persistent underlying inflation, or as an attempt to stop the energy shock becoming embedded? My glass half full take interpretation is that the curve has already done a tremendous amount of tightening for them and in line with the house view the forward for Core PCE is quite constrained. I think regardless of what they say or what the dots do, there is more than enough hikes already priced (unless oil is going to 150).

Energy: . Distillates have gone vertical again and physical markets remain incredibly tight. Saudi’s East- West pipeline disruption forced the suspension of Yanbu loadings and cancellation of some European cargoes, with European physical crude trading north of $130 in places yesterday. Despite all that there are reports of more visible signs of cargoes moving through the strait. " Iraq's seaborne crude oil exports from its southern Gulf terminals averaged 3.16 million barrels/day in the first 10 days of September, nearing the prewar levels of 3.335 million b/d recorded in February" (platts).. European gas was an interesting exception yesterday, with TTF down roughly 3%, its first meaningful down day in a while. On energy, though, I have no special insight. Like everyone else, I’m trying to focus on incentives. Economically, it is rational for all sides to try to find a pathway toward a deal, but I have very little certainty around timing/outcome...it does seems more is getting out of the strait then people appreciate.

China: China increasingly feels like an important potential catalyst. Araghchi is in Beijing for talks with Wang Yi today, while Bessent meets He Lifeng this weekend ahead of the planned Trump-Xi summit on September 24. Iran is expected to feature in those discussions. China has meaningful economic leverage with Tehran and a direct channel into Washington… if Beijing wants to use both, that creates a credible bridge toward an off ramp. Feels like the key potential diplomatic pathway to watch.

Risk: On AI the bigger issue is risk appetite. July was difficult, August incredibly choppy, and just as people started re-risking in early September when we got Monday’s AI pause shock. Since then flows have been bitty. I’d describe the market as suffering from a structural lack of demand, rather than outright liquidation.. Think the market got the AI spending slowdown narrative on Monday morning wrong. With the test of time, I think that gets resolved higher (see Asia today). AI spending and AI progress are moving in one direction and that's higher. So the risk stack remains rates + energy, with the second feeding the first. My anchoring view remains that AI capability is accelerating, AI spending stays intact and the investment cycle continues to support the economy. Optimistic that with WTI +$100 and China/US meeting ahead…