Episode summary
Riding the AI Wave
The Markets
· · Hosts: Chris Hussey · Guests: Anshul Sehgal
Summary
Anshul Sehgal argued that the Fed’s latest meeting was only a minor shift in tone, not a policy pivot. He said stronger labor data, a firmer US consumer, and war-related inflation risk make the committee more divided, but he expects no move from either Powell or Kevin Warsh for the next three to six months. In his view, the market is already pricing that in, with no hike or cut likely through the middle of next year.
He also explained why credit and equities have detached from higher oil prices and elevated rates. Post-GFC private-sector balance sheets are much less levered, households are in better shape, and AI is creating a genuine earnings and productivity story that supports equities even as inflation stays sticky. That same AI theme is also driving the big tech complex: the market liked recent hyperscaler results, especially because capex did not surge as much as feared, while token demand and cloud compute demand are exploding.
Sehgal kept a constructive but selective stance. He said Goldman’s view is to stay invested in AI, but at a lower conviction level after the April rebound, while rotating some exposure toward energy and defense. Looking into May, he said inflation, consumer spending, and travel data will matter most for judging whether growth cracks in June or July.
Key takeaways
- Sehgal expects no Fed policy change for the next three to six months, and says the market is priced for that.
- He thinks Warsh would be less dovish than Powell over time, but would likely move slowly.
- He says AI has helped equities decouple from war, oil, and higher yields because the market is rewarding real earnings and productivity potential.
- He said the market liked hyperscaler earnings because AI demand is surging, but capex did not jump as much as feared.
- His current allocation view is about seven on ten for tech, with more weight in energy and defense and no fixed income.
Notable quotes
“we don't expect Warsh or Powell Fed policy to be on the move for the next three to six months”
“The market's basically pricing in no hike or no cut practically through the middle of next year”
“we live in a multi-factor world is what I'm basically saying”
“The market liked their earnings broadly. The market was happy that they weren't investing a truckload more in AI capex”
“we're back to a seven on ten waiting for better entry points to take it up again”
How the episode opens
This is The Markets. I'm Chris Hussey and today is Thursday, April 30th. And I'm here on the trading floor with Anshul Sehgal who's global co-head of fixed income, currency, and commodities within Global Banking & Markets.
Anshul, thanks so much for joining us here on The Markets. Thank you for having me. All right.
We're coming right in the wake of the Fed that came in yesterday afternoon. A little hawkish tilt, maybe. Powell said he's going to stick around.
Rates shrug. What do you make of it all? A little bit of a divided committee.
So, if you see where the Fed was after the prior meeting, they were signaling one cut this year, largely because they expected labor markets to continue to be soggy. Since then, we got labor market data that was actually strong. The US consumer seems to be in better shape than what the Fed had projected.
And of course, you've got the war, which is inflationary. A supply side shock, which the Fed doesn't really have the tools for. But still, they don't want inflation expectations to become entrenched.
So, if you look at pricing for the ECB, we just had the ECB meeting as well. They're pricing in three to three and a half hikes this year. They're more energy sensitive because they import all of their energy, as opposed to the United States.
But still, central banks need to be more centered. So, you've got four dissents. One for a cut this meeting.
But three of the dissents were for the Fed to be more nuanced and more balanced. And essentially, not pre-committing in a very soft way. There is no commitment.
It's just forward guidance. But the Fed not pre committing to a cut being the next move whenever it might be.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed policy shifts
- fomc meeting
- ai earnings
- fixed income outlook
- currency and commodities
Companies and tickers mentioned
- GS
- Goldman Sachs
Watch the episode
Watch “Riding the AI Wave” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from The Markets
The Markets, this episode and its artwork belong to Goldman Sachs. Octagon is not affiliated with the show; this page is an independent summary.
