---
title: "Ashok Varadhan, US stocks grind higher on AI momentum, Goldman Sachs Equities trading floor; High single-stock dispersion likely to persist"
sdDatePublished: "2026-08-08T11:19:00Z"
source: "https://www.goldmansachs.com/pdfs/insights/the-markets/why-us-stocks-may-grind-higher/transcript.pdf"
topics:
  - name: "financial service"
    identifier: "medtop:20001370"
locations:
  - "Japan"
  - "United States"
---


Ashok Varadhan, US stocks grind higher on AI momentum, Goldman Sachs Equities trading floor; High single-stock dispersion likely to persist

Why US Stocks May Grind Higher

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Goldman Sachs The Markets
Why US Stocks May ‘Grind Higher'
Ashok Varadhan, Co-Head of Global Banking & Markets
Mike Washington, Host, Co-Head of New York & International
High Touch Sales Trading, Global Banking & Markets
Date of recording: August 5, 2026
Mike Washington: This is The Markets. I'm Mike Washington.
Today is Wednesday, August 5th, and I'm on the Goldman Sachs
Equities trading floor, joined by Ashok Varadhan. Ashok is the
co-head of Global Banking and Markets at Goldman Sachs.
Ashok, it's great to have you.
Ashok Varadhan: Yeah, it's good to be here again.
Mike Washington: I got to tell you, there's a ton going on right
now. I feel like there's a bunch of different ways that we could
take this conversation, but I want to start on AI and momentum.
You were on this podcast back in Q4 of 2025. You said that
stocks are going higher and AI specifically was going higher. We
just had one of the most violent momentum drawdowns in
history last week to a V-shaped recovery in tech, and S&P sits at
all-time highs.
Do you feel like this is the setup that markets could continue to
grind higher on the go forward, or is there a wall of worry that we
still have to get over?
Ashok Varadhan: I think we probably grind higher. I'd say
obviously July was a difficult month for markets across a bunch
of variety of different things.
I'd say first, obviously, the war re-escalated, and that obviously
created some, some trepidation in the market. There was
obviously nervousness that the Fed could potentially hike rates,
and that created an item on the wall of worry. And then, of

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course that kind of related to and kind of somewhat unrelated to,
like you said, the violent tech momentum unwind that we saw.
And I think sort of all of those things, not just the tech
momentum unwind, but I think all of those things kind of hit
something like a recovery towards the latter part of July. And so
it feels like signals are a little bit clear ahead. I'd also say is
clearly it's well documented that there was a lot of leverage, in
the AI trade, and I think a lot of that leverage has been unwound,
which leads for a higher quality rally going forward.
Mike Washington: One feature of 2026 has been that single
stock vol relative to index vol is stretched. The spread is very
high. What do you make of that? Is that a feature that is going to
continue into the end of 2026, or do you start to see that revert,
where index vol starts to match what you're seeing on the single
stock side?
Ashok Varadhan: I think we're going to still see high levels of
dispersion. I don't know if it's going to be as extreme as what we
saw. In fact, what's interesting is, given all of the things that
transpired in the month of July, the S&P was unchanged. So that
gives you a sense of, like, the stability that you're seeing at the
index level, but the variance that you're seeing on the single
stock level.
I think that's likely to continue because of this AI theme affects
companies so differently, whether you're in the supply side of the
chain, whether you're a consumer of AI, whether you're a
hyperscaler. I think there are so many different facets that affect
sort of the perception of your company on a go-forward basis, so
that's likely to continue. That being said, I think we've probably
seen the extremes of dispersion.
Mike Washington: You mentioned the Fed, you mentioned some
of these crosscurrents of what the interest rate environment is
looking like. We came into the year expecting cuts. It doesn't feel
like we're getting that at all.

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Actually, probably going to get a hike by the end of the year if you
look at what the market is pricing in. What do you make of that?
What do you make of the interest rate path on the go forward?
Ashok Varadhan: I don't think we will see hikes in the latter part
of this year. I think rates are going to stay on hold.
I know that's a little bit counter-consensus or that's not
consistent with what you're seeing in market pricing, but my view
is that a lot of the things which caused inflation to be elevated
are a little bit in the rearview mirror with respect to, obviously,
with respect to tariffs. And also if you believe that we're on the
precipice of getting a deal certainly around the Strait of Hormuz.
I'd also say that while the AI infra build-out can put pressure on
resources and stoke some inflation fears over the long run, I do
think it's, you know, once the infra is built, it's fairly
disinflationary.
Mike Washington: I want to double-click on that AI infra that
you just mentioned in particular to credit, if you put your credit
lens on. As hyperscalers, companies are having to tap into debt
markets to now finance some of these AI investments, are you
surprised that credit spreads have remained tight in light of that?
And then to a second point, you don't expect rate hikes this year,
do you think that that actually presents a really constructive
backdrop for credit?
Ashok Varadhan: I think I'm fairly constructive on credit. That
being said, we're seeing a lot of supply, and I think with that
supply there needs to be a little bit more of a risk premium or a
little bit more of a concession.
I think you're seeing that. I think part of the reason why credit
spreads are not moving out wildly is the actual underlying
nominal economy has proved itself incredibly resilient despite
some of these exogenous shocks. And so if you think the
exogenous shocks are going away and you still have the resilience
of the economy, I think you can still say that your sort of realized
expectation of default remains fairly low.

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Mike Washington: On the currency side, there was some yen
intervention last week to stabilize Asian markets. How do you
factor the risk that is posed if the, the yen destabilizes in the way
that potentially people are starting to fear?
Ashok Varadhan: Coming out of the pandemic, and certainly
over the course of the last three or four years, you've seen
inflation all around the globe running above stated central bank
targets. I think you've seen normalization in the US, you've seen
normalization in Europe, whether that be in Eurozone or in the
UK, and you haven't seen meaningful normalization in Japan,
and that's the reason why the yen is trading weak.
I don't really believe in intervention. I don't think it works over
the longer run. I think ultimately, to see stabilization in the yen,
the Bank of Japan is going to have to normalize rates properly.
Mike Washington: That makes a ton of sense. We've talked
currencies, we've talked credit, we've talked equities, rates. If you
had to package it up into one trade right now, what's the trade?
Ashok Varadhan: Well, I think there are a couple of different
things. I think, one, I think energy is going to go back down. I
think oil settles back down well below $70 a barrel, maybe even
lower once we get towards the latter part of the year.
I think that that makes me very constructive on front-end yields
in the US. I think, you know, if you look at hikes priced in, I
think that's fairly attractive. And like I said before, I think that
leads for a backdrop in which sort of the overall market is going
to really participate in both the productivity gains from AI, but
also a resilient, a resilient economy.
Mike Washington: Which I also think underscores your probably
broader thesis that markets are headed higher. There's a really
constructive backdrop. Growth is strong. You just look at this
earnings period, and we should continue to grind higher into
year-end.
Ashok Varadhan: Yeah. I'd say, stay invested. Stay invested
would be my advice.

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Mike Washington: Which was your thesis in Q4, and you were
right.
Ashok Varadhan: Yes, stay invested.
Mike Washington: Okay, Ashok, what are you watching moving
forward?
Ashok Varadhan: We have a jobs report, which I want to pay a
lot of attention to, and of course, we get more readings on
inflation. Those are the two pieces of the puzzle that we don't
have, and so we'll be paying close attention to that.
Mike Washington: Awesome. Ashok, it's always great to have
you here.
Ashok Varadhan: Thank you. Thanks you.
Mike Washington: And that does it for this week's episode of The
Markets. I'm Mike Washington. Thanks for listening.

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