GS Shawn Tuteja framework and AI

Below I attempt to 1) lay out a near-term framework for US equities in light of the strong EPS season and FOMC path and 2) talk through fundamentals and technicals of the AI trade.

Amidst the uncertainty and performance pain that July brought (global fundamental l/s managers had their second-worst monthly drawdown in the last four years), one certainty is that EPS season has been unequivocally strong. 90% of S&P 500 companies have reported Q2 results, and of these, 64% have beaten consensus EPS forecasts by at least a standard deviation, one of the highest levels on record. As a result, 2027 EPS has been lifted 2%. What remains interesting is that these EPS beats haven’t been rewarded, as the median stock next day returns for a name that beats by more than one standard deviation has been only 33 bps of outperformance vs the SPX (vs a median of 95 bps going back to 2010). Even more granularly, the median stock in the tech sector that beat its consensus EPS by more than one standard deviation has lagged the SPX by 99 bps the following day.

Source: Global Investment Research as of 7/31/2026. Past performance is not indicative of future results.

Source: Global Investment Research as of 7/31/2026. Past performance is not indicative of future results.

I continue to think the north star is 8,000 for SPX year-end, but I do wonder if the path forward in broad index might take time to play out. Namely, I believe for the next month and a half, we could find ourselves in a relatively tight range in SPX, consistent with what the implied volatility market is pricing. Two weeks ago and 5.6% lower in SPX, the wall of worry around FOMC, rate path, backend bonds, geopolitics, and equity supply was prevalent in every conversation we had. This makes sense as many clients had de-risked throughout most of July and didn’t want to rush to re-risk into a usually bad seasonal in August during the heart of EPS season and macro uncertainty.

The backdrop at these current levels is different – while nets are not historically high, it’s hard to argue that clients do not carry equity risk (nets 67th %ile over 5-years, grosses 89th %ile). Last Tuesday saw 4mm SPX calls trade (the largest amount in history) and the beginning of last week saw nearly the largest two-day decline in SPX short-dated put/call skew in the past 10 years. Sentiment amongst equity clients has certainly shifted around the Fed – the equity view has moved from a fear of rate hikes to sort of a win-win for this upcoming September FOMC meeting. The prevalent view is either a) the Fed “dovishly” hikes in September and that stabilizes the backend of the curve or b) the Fed doesn’t hike and the broadening out trade continues to work into a strong EPS backdrop. Both scenarios