"We actually do get clients saying, 'Why are you telling us stay invested at all-time highs,' and the reality is earnings are upward sloping." - Sharmin Mossavar-Rahmani [00:00:01]
"Recognize that all these headlines are actually irrelevant." - Sharmin Mossavar-Rahmani [00:00:21]
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"The US has become energy independent... And so those mix of factors make the US economy very resilient." - Sharmin Mossavar-Rahmani [00:02:14]
"If you look at the remaining 493 companies or you take the median stock in the S&P 500, the numbers are around 10 to 12%... pretty significant when you think trend earnings growth in the United States since World War II has been around 6 and a half percent." - Sharmin Mossavar-Rahmani [00:03:04]
"According to our analysis, we don't find that IPO activity has actually any bearing on one year or 5-year forward returns for the market overall." - Matt Verrochi [00:04:46]
"One of the messages that we actually have for clients throughout this year is the need to separate noise from signal." - Sharmin Mossavar-Rahmani [00:06:58]
"Buying put options on a strategic basis or systematic basis is prohibitively expensive... it could be at a cost of 3 to 7% per year." - Matt Verrochi [00:09:37]
Speakers & Credentials
Sharmin Mossavar-Rahmani: Chief Investment Officer for the Investment Strategy Group and Head of Wealth Management Investment Strategy at Goldman Sachs. Global authority on asset allocation, macroeconomic forecasting, and wealth management strategy.
Matt Verrochi: Managing Director and Senior Investment Strategist within the Investment Strategy Group at Goldman Sachs, focusing on US equity market dynamics, liquidity analysis, corporate capital deployment, and derivative risk management.
Matt Gibson (Host / Moderator): Senior Executive at Goldman Sachs, moderating client Q&A on the mid-year market outlook.
1. Executive Summary
Despite significant macro headwinds in early 2026—including a global energy shock, geopolitical friction in the Middle East, and market volatility—the US economy and corporate earnings have demonstrated remarkable structural resilience [00:00:40].
US GDP growth for 2026 is tracking at approximately 2.2% (versus an original baseline forecast of 2.3%), insulated by net energy independence and reduced per-capita oil consumption [00:01:21].
S&P 500 corporate earnings growth expectations for 2026 have been revised upward from ~10% to 17%, driven not only by mega-cap technology but also by median S&P 500 stock earnings growth of 10–12% and continued profit margin expansion [00:02:44].
Tactical portfolio positioning maintains a full allocation to US equities while selectively increasing exposure to Emerging Markets outside of China (e.g., South Korea, Taiwan) to capture AI hardware supply chain growth [00:03:46].
Concerns that accelerating IPO supply will overwhelm market liquidity are unfounded; total annual equity issuance equals ~1.7% of Russell 3000 market cap (matching the historical 1.8% median) and is far exceeded by $1.3 trillion in corporate share buybacks [00:05:00].
Hyperscaler tech firms are projecting to deploy 100% of their increase in operating cash flow into AI capex, temporarily slowing their buybacks, though overall S&P 500 buybacks remain expanding at 3% YoY [00:05:28, 00:05:52].
Investors are cautioned against trying to time all-time market highs or purchasing systematic put option hedges (which carry a prohibitive 3–7% annual drag); dollar-cost averaging and allocations to investment-grade bonds represent the optimal long-term strategy [00:07:34, 00:09:32].
2. Chronological Table of Contents
[00:00:00] Introduction: Staying Invested at All-Time Market Highs
[00:00:36] US Macroeconomic Resilience & Structural Energy Shifts
[00:03:39] International Asset Allocation: EM Ex-China & AI Beneficiaries
[00:04:23] Equity Capital Markets Supply: IPO Volumes vs. Share Repurchases
[00:05:39] Hyperscaler AI Capex Spending & Impact on Buybacks
[00:06:44] Investor Strategy at Record Highs: Separating Signal from Noise
[00:08:11] Global Geopolitical Risk Factors: Middle East & US-China Dynamics
[00:09:12] Portfolio Hedging: Evaluating Put Options vs. Investment-Grade Bonds
[00:10:00] Strategic Outlook: US Preeminence & Looking Ahead to 2027
3. Detailed Thematic Summary
US Macroeconomic Resilience & Structural Energy Shifts
The US economy and corporate sectors have demonstrated remarkable durability despite global energy shocks and heightened market volatility in H1 2026 [00:00:40]. Initial baseline GDP forecasts of 2.3% for 2026 have only seen a nominal adjustment down to 2.2% [00:01:21].
This macroeconomic resilience is structurally anchored in fundamental energy shifts:
Per-capita US oil consumption dropped from ~30 barrels during 1970s/1980s crises down to 22–23 barrels per capita today [00:01:53].
The US has emerged as the world's largest Liquefied Natural Gas (LNG) exporter, producing substantially higher volumes than Qatar [00:02:08].
US domestic crude oil production is now nearly double that of Saudi Arabia, establishing true net energy independence and insulating US consumers and corporations from external oil shocks [00:02:14].
Corporate earnings in 2026 have far outpaced consensus expectations across multiple sectors [00:02:31].
Goldman Sachs ISG revised its full-year 2026 S&P 500 earnings growth target from ~10% (±1%) up to 17% [00:02:51].
Growth is broadly distributed: while "Magnificent Seven" mega-caps contributed heavily, the S&P 493 and the median S&P 500 stock generated solid 10–12% earnings growth [00:03:04].
This exceeds long-term post-WWII average trend earnings growth of ~6.5% [00:03:16].
Continuous quarter-over-quarter margin expansion across S&P 500 firms supports the ongoing sustainability of this earnings trajectory [00:03:27].
Tactical Asset Allocation: Emerging Markets Ex-China & AI Infrastructure
Goldman Sachs ISG maintains an overweight stance on US equities while making strategic adjustments to international allocations [00:03:46].
Exposure to Emerging Markets has been expanded, specifically focusing on Emerging Markets outside of China [00:03:53].
This tilt aims to capture global AI infrastructure tailwinds in technology hardware hubs like South Korea and Taiwan [00:04:12].
Capital Markets Supply Dynamics: IPOs vs. Share Repurchases
Concerns that expanding IPO activity and new equity issuance might overwhelm market liquidity are refuted by historical data [00:04:25]:
Historical analysis reveals no statistically significant relationship between annual IPO volume and 1-year or 5-year forward equity returns [00:04:53].
Total annual equity issuance (IPOs and secondaries) represents ~1.7% of Russell 3000 market capitalization, tracking right in line with the long-term historical median of 1.8% per year since 1995 [00:05:06].
Corporate buyback demand is projected to expand 3% YoY to $1.3 trillion, easily absorbing total IPO and secondary equity supply [00:05:28].
Hyperscaler AI Capex vs. Corporate Repurchases
Technology hyperscalers are directing approximately 100% of their increase in operating cash flows toward AI capital expenditures [00:05:52].
This dynamic has moderated individual share repurchases among hyperscalers, but does not threaten overall S&P 500 earnings growth [00:06:05].
If AI Capex yields attractive ROI, elevated capital investment will continue driving long-term corporate earnings; if ROI lags, Capex will scale back, releasing cash flow back toward share buybacks [00:06:23].
Investor Psychology, Market Timing, and Risk Management
Investors routinely hesitate to commit capital when equity indices trade at or near record all-time highs [00:06:46].
Signal vs. Noise: Headline commentary generates record noise, but corporate earnings inherently trend upward over time, and stock prices follow earnings [00:07:07].
Dollar-Cost Averaging: The recommended deployment model is dollar-cost averaging (e.g., 25% quarterly tranches over 4 quarters) to manage timing risk [00:07:43].
Options vs. Bonds for Tail-Risk: Systematic put option hedging strategies are rejected due to their prohibitive annual drag of 3% to 7% against average historical equity returns of ~10% [00:09:37]. High-quality Investment-Grade (IG) bonds remain the superior structural portfolio hedge [00:09:32].
The overarching thesis remains "US Preeminence"—driven by widening productivity, GDP per capita, and technology gaps between the US and the rest of the world [00:10:06].
High-frequency financial media creates substantial informational "noise" around geopolitical headline spikes, market index record highs, and short-term volatility. The strategic investor framework filters out sensationalist headlines and anchors positioning on fundamental "signal": corporate earnings trajectories, productivity trends, and real GDP growth. Because stock prices historically follow corporate earnings long-term, index peak headlines are non-actionable noise [00:06:58].
Strategic Capital Averaging (Dollar-Cost Averaging At Highs)
To overcome market-timing paralysis when equity markets reach all-time highs, investors should deploy capital in fixed periodic installments (e.g., 25% tranches over 4 consecutive quarters). This structure converts short-term market pullbacks into a portfolio advantage: if stock prices decline after deploying initial capital, subsequent tranches purchase assets at cheaper valuations, lowering the overall average cost basis [00:07:43].
Options Cost Drag & Asymmetric Hedging
Investors frequently seek to buy systematic put options to protect stock portfolios against downside volatility. However, quantitative analysis demonstrates that purchasing continuous option protection imposes a heavy annual cost drag of 3% to 7%. Measured against an average long-term US equity return of ~10%, systematic options hedging destroys the vast majority of long-term compounding. High-grade Investment-Grade (IG) bonds serve as a far more capital-efficient structural hedge [00:09:32].
The US Preeminence Thesis
A core structural investment thesis holding that the economic, technological, and productivity divergence between the US and the rest of the world continues to widen. Backed by energy independence, deep domestic capital markets, world-leading technology infrastructure, and strong demographic productivity, the US maintains structural preeminence that insulates its markets from external macro shocks far better than foreign developed or emerging markets [00:10:06].
6. Anecdotes
Historical Oil Shock Transformation
Why the speaker shared it: Sharmin Mossavar-Rahmani cited historical oil crises to contrast past macroeconomic vulnerability with current US energy resilience [00:01:47].
Context: During the Arab Oil Embargo (1973) and the Iran-Iraq War (1980), energy shocks crippled US consumer spending because energy intensity stood at ~30 barrels per capita. Today, energy intensity has dropped to 22–23 barrels per capita, and the US is the world's leading exporter of LNG and top crude producer, rendering geopolitical energy spikes far less damaging to national GDP [00:01:53].
The Investor Psychology Dilemma on Tranches
Why the speaker shared it: Mossavar-Rahmani shared a recurring client exchange to highlight the cognitive contradiction investors experience when entering markets [00:07:39].
Context: After committing to dollar-cost average into equities in 25% tranches over four quarters, clients routinely express hope that the market rises right after their first installment. She highlights the behavioral irony: if you still have 75% of your cash left to deploy, you should logically want the market to drop so you can deploy remaining tranches at lower entry prices [00:07:49].
7. References & Recommendations
Companies & Institutions
Goldman Sachs (Investment Strategy Group): Global wealth management division presenting the 2026 mid-year outlook [00:00:36].
S&P 500 Index / S&P 493: Primary equity benchmarks used to evaluate corporate earnings growth, market concentration, and profit margin expansion [00:02:44, 00:03:04].
Russell 3000 Index: Reference index used to measure overall US market cap equity issuance and IPO supply dynamics [00:05:06].
Magnificent Seven / Hyperscalers: Mega-cap technology firms evaluated regarding AI Capex cash deployment versus stock buyback trends [00:02:58, 00:05:46].
Geopolitical Institutions, Figures & Regions
United States: Central focus of the macroeconomic analysis, energy independence thesis, and equity overweights [00:00:53].
China: Mentioned in the context of emerging market portfolio exclusions and US-China trade/geopolitical friction [00:03:53, 00:08:46].
President Donald Trump: Cited by Sharmin Mossavar-Rahmani regarding US domestic political agendas and trade policy dynamics with China [00:08:58].
South Korea & Taiwan: Mentioned as key emerging market allocations benefiting from global AI hardware demand [00:04:12].
Qatar: Cited as a comparative LNG export benchmark [00:02:08].
Saudi Arabia: Referenced to illustrate US crude oil production dominance [00:02:14].
Iran & Strait of Hormuz: Mentioned as key geopolitical risk factors regarding energy shipping routes [00:08:23].
Historical Events
1973 Arab Oil Embargo: Historical energy crisis cited to illustrate past US energy vulnerability [00:01:47].
1980 Iran-Iraq War: Historical reference point for oil price shocks [00:01:47].
Post-World War II Period: Historical benchmark baseline for average annual US corporate earnings growth (~6.5%) [00:03:16].
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