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NextFin News - US stocks are entering a "ping-pong" pattern of alternating rallies and selloffs, according to Katherine Bordlemay of Goldman Sachs Asset Management, as investors swing between oil-supply shocks and resilient corporate earnings. The takeaway from Goldman's equity team is that the swings are likely to persist, but the underlying trend stays upward because profit growth - not multiple expansion - is carrying the market.
The Ping-Pong: Volatility Regime, Not Trend Reversal
Bordlemay, a managing director in Goldman Sachs Asset Management's Fundamental Equity group and co-head of client portfolio management for the Americas, described a market in which bad-news days and good-news days trade places without either side establishing control. The characterization fits a year in which the S&P 500 has delivered a double-digit advance while volatility has refused to stay quiet.
The data supports the two-sided read. The S&P 500 closed at 7,627.30 on September 1, 2026, after sessions that moved on oil headlines, Federal Reserve expectations, and artificial-intelligence capital spending. The Cboe Volatility Index stood at 15.20 at the September 2 close, down from 16.34 the prior session and 14.92 on August 31 - a compressed range that still leaves investors braced for the next catalyst.
The catalysts are easy to name. On one side sits the disruption in the Strait of Hormuz, which has pushed Brent crude above $95 a barrel and kept supply-risk premiums in place. On the other side sits corporate America's earnings engine: first-quarter profits rose 18% year over year, and the median S&P 500 company is on track for its strongest quarterly growth in a decade outside the 2018 tax-cut period and the post-pandemic reopening.
That combination is the story in miniature. Oil shocks and Fed uncertainty create the ping-pong; earnings decide where the table tilts.
Earnings, Not Multiples, Are Carrying the Rally
The first question the ping-pong framing raises is whether the back-and-forth is a warning sign or simply the price of admission for a bull market that has run far ahead of macro comfort. The answer matters because the two readings imply opposite positioning: a regime of elevated crosscurrents rewards patience and diversification, while a trend reversal demands defense.
Goldman Sachs Research's own work points to the regime reading. Ben Snider, chief US equity strategist, has written that the near-term path for equities will track geopolitical headlines rather than earnings fundamentals:
"In the near term, equity market gyrations will likely continue to mirror geopolitical volatility."
The S&P 500's roughly 13% advance since late March, the sharpest rally since April 2020 and, before that, March 2009, has unfolded against exactly this backdrop of geopolitical and policy uncertainty.
The mechanism is a dispersion between the macro narrative and the micro reality. Macro headlines - oil, the Fed, trade - move the index intraday and across sessions. Micro fundamentals - revenue, margins, AI-driven capex - drive the earnings revisions that ultimately set direction. When those two layers disagree, you get ping-pong: the macro layer pulls the market down on Tuesday, the micro layer pulls it back up on Thursday.
This is a cyclical volatility pattern layered on top of a structural earnings trend. The cyclical evidence is straightforward: the drivers are short-lived shocks - a shipping chokepoint, a single inflation print, a Fed speaker - that historically revert once the headline passes. The structural evidence is equally clear: AI infrastructure spending is a multi-year buildout, not a one-quarter event, and the earnings revisions it has triggered have breadth across semiconductors, hardware, industrials, and utilities.
The practical implication: ping-pong markets punish timing and reward exposure. Investors who chase each daily swing buy high and sell low inside a range; investors who keep exposure to the earnings-revision trend capture the upward tilt of the table.
Valuation Is Elevated, but It Is Not the Engine
The second question is what is actually powering the advance, because rallies built on multiple expansion break faster than rallies built on profit growth. Here the data is unusually clean. Goldman Sachs Research notes that the 2026 rally has been powered entirely by corporate profit growth rather than rising valuations.
The numbers are specific. The S&P 500 trades at about 21 times forward earnings, a level in the 88th percentile relative to the past 40 years. Elevated, yes - but the multiple is not the engine. The engine is the earnings line: earnings per share of $340 projected for 2026, up 24% from the prior year, and $385 for 2027, up 13%.
The valuation multiple is doing close to flat work while the denominator grows. That is a materially different risk profile from a multiple-driven melt-up, where a small change in discount rates or sentiment can wipe out a large share of the gain. Here, even if the multiple compresses modestly, earnings growth can offset it - which is exactly Goldman's base case of a roughly flat multiple through year-end, supported by modestly lower Treasury yields and offset by decelerating growth and skepticism about the staying power of AI-related profits.
This is where Bordlemay's earlier commentary connects to the ping-pong framing. In an April appearance, she emphasized that equities are benefiting from upward earnings revisions supported by significant and durable AI investment spending projected to reach $1 trillion over the next three to four years. Durability is the operative word: a three-to-four-year capex cycle does not reverse on a single oil spike or a single hot inflation print. It provides a floor under revisions even when the macro layer is throwing tantrums.
The second-order implication is often missed. A ping-pong market driven by earnings revisions is not just less fragile - it is also more selective. When multiples lead, everything rises together. When earnings lead, dispersion widens: companies capturing AI-driven demand and pricing power outperform, while companies facing softening consumer spending, elevated input costs, and fading fiscal stimulus lag. Goldman's strategists explicitly flag that the broader economy presents a mixed picture for firms outside the AI investment chain. That is the setup for stock-picking to matter more than index exposure - the opposite of what a liquidity-driven melt-up delivers.
The AI Capex Supercycle Is the Structural Leg - and the Bar Keeps Rising
The third question is whether the earnings engine itself is sustainable, or whether it is a one-time capex spike that will fade. This is the crux of the structural-versus-cyclical call, and the answer determines whether the ping-pong table keeps tilting up.
The consensus of analyst estimates calls for the largest hyperscale technology companies to spend $754 billion on capital expenditures this year, an 83% increase from 2025, and $905 billion in 2027. Snider has written: "We believe there is upside risk to consensus capex estimates in 2027. Analysts have been too conservative during each of the past three years." If he is right, the earnings revisions have another leg before they plateau.
But the same passage contains the trap. Snider also wrote: "Generating sufficient returns on AI investment spending will ultimately require that enterprise end users enjoy sufficient productivity gains to justify spending on AI applications." The capex is real money leaving hyperscaler balance sheets today. The returns are promised productivity gains that have not yet shown up at scale in enterprise end-user economics.
That gap - money spent now, returns promised later - is the structural risk inside the structural opportunity. Goldman's forecasts embed a 0.4 percentage point boost to S&P 500 EPS growth from AI productivity this year and a 1.5 percentage point boost in 2027. Those are meaningful but not overwhelming contributions relative to a 24% earnings growth year. The market is being asked to believe that a small productivity contribution today scales into the justification for a trillion-dollar buildout.
So the structural leg is real but conditional. The capex cycle is durable in the sense that data centers, power infrastructure, and semiconductor capacity take years to build and cannot be switched off without stranding assets. But the earnings justification is conditional on enterprise adoption moving from pilot to production. That is why the ping-pong will persist: every AI earnings report and every capex guidance update becomes a referendum on whether the returns are arriving on schedule.
The Counter-Thesis: This Is Not Ping-Pong, It Is the Top
The strongest case against the ping-pong reading is that it mistakes late-cycle complacency for resilience. The S&P 500 at 21 times forward earnings, in the 88th percentile of four decades, is not cheap. Goldman Sachs Research's US Sentiment Indicator recovered to positive 0.8 from a low of negative 0.9 in late March, and while that remains below the peaks of prior overheated rallies, it is moving in the wrong direction for a bull market that claims it is merely grinding.
The counter-thesis has a named institutional anchor: Goldman's own bull-market-ending checklist. Snider writes that the conditions that have historically marked the end of major bull markets are mostly absent, but cautionary signals have started to appear - rising retail trading, an elevated speculative-trading indicator, narrowing market breadth, and a sharp rise in momentum. Historically, that combination has signaled elevated market risk. The Strait of Hormuz disruption adds a cost-push inflation channel that could force the Federal Reserve to hold or raise rates into slowing growth, the classic late-cycle trap.
The counter-thesis is serious and takes roughly a third of the positive argument, as it should. Its weak point is timing. Late-cycle signals can persist for years; the 1995-1999 period produced repeated "top" warnings while earnings carried the market higher. The ping-pong reading does not deny the risks - it prices them as volatility, not as an immediate trend break.
The falsifying signal is specific: if the S&P 500 forward earnings multiple holds above 21 times while earnings revisions turn negative for two consecutive months - multiple and revisions both failing at the same time - the "earnings anchor" thesis is wrong and the ping-pong becomes a distribution top. A single bad session, a single oil spike, or a single hot inflation print does not falsify it. Both legs breaking together does.
What to Watch: Three Horizons, Three Answers
What does the ping-pong pattern mean for the next three to twelve months? Three time horizons, three different answers.
Short term (weeks to a quarter): volatility stays elevated. The Federal Reserve's mid-September policy meeting is the next scheduled catalyst. Before Fed Chair Kevin Warsh's Jackson Hole speech on August 28, investors put the odds of a September rate increase at about one in three; after he said inflation remains higher than the central bank's 2% goal and suggested rates may need to rise, that likelihood moved above 50/50. "We must be confident that underlying inflation is moving to our objective clearly and at sufficient speed," Warsh said, while describing labor markets as "quite stable" with unemployment at 4.1%. Any rate decision that surprises - in either direction - will produce a sharp one-day move that the other side spends the rest of the week trying to reverse. That is ping-pong in its purest form.
Medium term (three to twelve months): the earnings trend dominates. Goldman's base case of an 8000 year-end S&P 500 target, raised from an earlier 7600 projection, rests on EPS of $340 in 2026 and continuation of the capex cycle. The upside case adds Snider's view that 2027 capex estimates are too conservative, which would lift revisions further. The downside case is the counter-thesis realized: input-cost pressure from energy, softening consumer spending, and a multiple compression that earnings growth cannot offset.
Long term (structural): the question is whether AI capex converts into productivity. If enterprise end users realize the gains Snider says are required, the earnings engine extends into 2027 and beyond, and today's volatility looks like noise on a structural uptrend. If the productivity gains fail to materialize, the capex cycle becomes a margin headwind and the ping-pong table tilts down.
For investors, the actionable read is not a trade but a discipline: in a ping-pong market, the cost of being whipsawed exceeds the cost of being patient. Exposure to the earnings-revision trend, diversified away from the narrowest AI winners, is the position that matches the diagnosis. Companies facing the mixed macro backdrop - softening consumers, elevated input costs, fading fiscal stimulus - are the ones most exposed to the down days.
The closing judgment: this is a market being shaken by cyclical crosscurrents while a structural earnings trend does the real work. The ping-pong will continue until the AI return-on-investment question is answered - and that answer, when it comes, will not be a daily headline.
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