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“While these developments have lifted market spirits, analysts remain skeptical that the underlying issues will be fully resolved,” said Fawad Razaqzada at City Index and Forex.com. “Nevertheless, traders have embraced the risk-on mood.”
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To Mark Hackett at Nationwide, tailwinds for equity markets are significant, with technicals (momentum, breadth, risk metrics, financial conditions) intersecting with fundamentals (economic and earnings growth), as risks fade (trade, credit).
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“Moving forward, a cascade of tailwinds will support markets in coming months, including strong seasonality, resolution of trade disputes, fiscal stimulus, and easing monetary policy,” he said.
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This earnings season is standing out as analysts had set the bar higher by raising projections heading into it. Robust earnings and signs of sustained investment in artificial intelligence are countering threats to stocks from trade headlines and the government shutdown.
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“With companies having reported strong third-quarter results so far amid a favorable backdrop, we expect US stocks to rally further in the coming months,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management. “So, we maintain our attractive view on US equities, forecasting the S&P 500 to reach 7,300 by June 2026.”
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Microsoft, Alphabet, Amazon and Meta are projected to post a combined $360 billion in capital expenditures in their current fiscal years, much of it related to AI. That spending is expected to jump to nearly $420 billion next year, according to analyst estimates compiled by Bloomberg.
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“We expect another strong round of megacap tech earnings reports, given the relentless demand for AI technology and infrastructure,” said Clark Bellin at Bellwether Wealth. “While profitability in AI remains an unknown, investors right now are willing to overlook this as the AI arms race heats up.”
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As champions of the tech-driven bull run, quarterly earnings from the Magnificent Seven this week can help investors decipher whether artificial intelligence hype is masking a bubble, according to Hardika Singh at Fundstrat Global Advisors.
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“But for me, those concerns in and of themselves aren’t enough to run for the hills,” Singh noted. “AI is transforming every single industry, and as I keep repeating, we’re literally in such early innings for this secular cycle that being worried about valuations and froth would be short-sighted.”
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To Matt Maley at Miller Tabak, the most-important issue will be the comments about the future rate of spending on AI from the hyperscalers.
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“Expectations are very high on this front, so there are some risks involved,” he said. “However, since there hasn’t been any signals that these companies will back off on their spending, these high expectations seem to be well placed.”
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“Our view remains firmly risk-on into 2026, with our base case for a further melt-up in risk assets in the coming months,” said Max Kettner at HSBC.
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Among the various catalysts, he cited: further signs of US growth resilience, subdued sentiment and positioning as well as liquidity tailwinds with an end to quantitative tightening and perhaps even more Fed liquidity support to avert a year-end funding squeeze.
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Equity analysts are expected to broaden their earnings revisions to more stocks toward the end of the year and into 2026, according to Morgan Stanley strategists.
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“We have high conviction in our rolling recovery thesis, which remains out of consensus,” the team led by Michael Wilson wrote.
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