Goldman's Varadhan: Three Reasons to Stay Invested
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- Ashok Varadhan, Goldman Sachs co-head of global banking and markets, told investors to "stay invested" on the firm's "The Markets" podcast, citing three pillars supporting a constructive outlook.
- Varadhan said he does not expect the Federal Reserve to raise interest rates in the latter part of 2026, a view that runs against market pricing reflecting some risk of resumed tightening.
- Following a disappointing jobs report, traders shifted bets on the Fed's next move — odds for a September hike fell to roughly 50% on Monday, while October odds rose to 63% per the CME Group's FedWatch gauge.
- Varadhan expects crude oil to settle "well below $70 a barrel, maybe even lower" by late 2026, even as West Texas Intermediate futures climbed back above $80 per barrel Monday amid doubts about a U.S.-Iran deal on the Strait of Hormuz.
- Varadhan called artificial intelligence an eventual disinflationary force, arguing that once the current AI infrastructure build-out is complete, the resulting productivity gains should offset near-term inflationary pressure from those resources.
- Varadhan cited resilient underlying nominal growth despite repeated external shocks as keeping him constructive on credit, though he noted heavy issuance means investors should demand somewhat more compensation for risk.
- The S&P 500 recently rallied to a record high, bringing 2026 gains to more than 13%.
Why it matters: Varadhan is publicly out on a limb against futures markets pricing 50-63% odds of a Fed hike within two months, and his sub-$70 oil call sits roughly $10+ above current WTI prices above $80 — meaning his bullish thesis requires both the Fed and the Strait of Hormuz situation to break in Goldman's preferred direction, with significant downside if either doesn't.
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