Goldman Sachs hedge fund coverage head Tony Pasquariello said on July 26 that U.S. equities remain very difficult to trade, with sharp internal market divergence and elevated volatility in momentum factors still defining the setup.
He said investors should simplify their portfolios and concentrate risk in the positions where conviction is highest. According to Pasquariello, headline volatility in the S&P 500 has stayed relatively limited, but the spread between single-stock and index implied volatility has kept widening, a sign that demand for single-name options and dispersion trades remains high.
Gold view turns more constructive
Pasquariello said he has become more positive on gold. In his view, a large share of speculative long positioning has already been flushed out since 2026, central bank purchases have resumed, and gold has repeatedly found support near $4,000.
He said rising U.S. interest rates and a stronger dollar could still weigh on the metal in the short term. Even so, he described that weakness as a chance to build structural long exposure on dips. The longer-term case, he said, rests mainly on the continued rise in global government debt burdens.
AI spending still needs to prove itself in revenue
On AI, Pasquariello said related credit supply has reached $489 billion so far this year, and the largest spenders are still increasing investment.
He added that the market still needs confirmation that heavy AI capital expenditure can convert into revenue growth. Google Cloud posted 82% year-over-year revenue growth, but the link between capital spending and sales growth is still not clear. Upcoming results from Microsoft, Meta, and Amazon will be the next test.
Fed expectations, Iran risks, and August buybacks
Pasquariello also said that rising expectations for further Federal Reserve rate hikes, along with the situation involving Iran, could add to equity volatility.
Brent crude has climbed 33% so far this month, and the expansion of the conflict to areas including the Red Sea has made the situation more complicated.
On flows, his tone was more constructive. He said the market has largely absorbed earlier large financing deals, and with earnings season nearing its end, stock buybacks are expected to pick up noticeably in August.