Why US Equity Returns Are Broadening Beyond AI Stocks

August 21, 2026

AI Summary

5 min read

In the second quarter, 64% of S&P 500 companies beat earnings estimates by more than one standard deviation—one of the highest beat rates on record. Yet the day after reporting, the tech names that beat actually underperformed the index by 130 basis points. That tension—strong earnings met with market skepticism—is the central dynamic Sean Tetazia, who oversees ETF and custom baskets trading at Goldman Sachs, unpacks in this episode. The market is not simply rewarding AI winners anymore; it is beginning to discriminate, rotate, and hedge in ways that suggest a broader and potentially more sustainable rally.

The Earnings Story Is Broad, Not Just AI-Driven

The headline takeaway from Q2 earnings is that growth is spreading. Nine of the 11 S&P 500 sectors posted double-digit year-over-year earnings growth. The median stock grew earnings 14% year over year—the largest increase since coming out of COVID. This is not just a Magnificent 7 story. The equal-weight S&P 500 has outperformed the cap-weighted index by nearly 300 basis points year to date. Tetazia attributes this broadening to three forces: declining uncertainty (about private credit, AI disruption, geopolitics, and Fed policy) has made other sectors investable again; sectors like software and healthcare, which were written off early in the year, have shown strong fundamentals; and the AI trade itself became so volatile

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What you'll learn

1 (00:04) **Introduction & Market Paradox** - Chris Hussie introduces Sean Tetazia from the Goldman Sachs trading floor to discuss the market's return to all-time highs after July volatility.
2 (01:08) **Exceptional Q2 Earnings Beat Rate** - Sean reports that 64% of companies beat estimates by more than one standard deviation, one of the highest beat rates on record.
3 (01:45) **Skepticism Creeps Into the AI Trade** - Despite strong beats, AI-related tech names have underperformed the S&P by 130 basis points the day after reporting.
4 (02:43) **The Market Is Broadening Out** - The equal-weight S&P has outperformed the cap-weighted S&P by nearly 300 basis points year-to-date.
5 (03:38) **Three Reasons for the Broadening** - Sean identifies three forces driving the rotation away from concentrated AI leadership.
6 (04:55) **Volatility Has Come Down, Enabling More Trades** - The VIX has fallen from 21 to 15 since the end of July.
7 (05:57) **Record Prime Book Buying & Cheap Index Hedges** - The past three weeks have seen the most net buying on Goldman's Prime Book since COVID.

+ Full timestamped outline available in the app

Show Notes

While artificial intelligence (AI) has been a key driver of US stocks, a wider range of sectors is starting to power the S&P 500, says Shawn Tuteja, head of ETF and Custom Basket Volatility Trading in Goldman Sachs FICC and Equities, on The Markets podcast. Tuteja also discusses the robust strength in earnings across 9 of 11 sectors in the S&P 500, elevated volatility among AI-related themes, and the interplay between oil prices, longer-maturity bond yields, and Federal Reserve policy.

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Filmed on August 19, 2026

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