Who's betting on an earnings boost for US stocks
SPY•Market participants see potential for US stocks to rise on profit growth, though they are uncertain companies can keep exceeding expectations. UBS expects AI-related spending to increase 84% to $900 billion this year, with semiconductor profits accounting for about half of S&P 500 earnings growth in the third quarter.
1. Earnings outlook
Some market participants are cautious on equities, expecting earnings to grow but questioning whether companies can continue surprising on the upside. UBS Global Wealth Management's chief investment office sees room for US equities to move higher amid strong profit growth, while saying volatility remains likely.
2. AI and valuations
UBS estimates AI-related spending will rise 84% this year to $900 billion and expects semiconductor profits alone to account for about half of S&P 500 earnings growth in the third quarter. Christian Stocker of UniCredit said the S&P 500's 12-month forward price-to-earnings ratio had fallen from around 23 at the start of the year to roughly 19, in line with long-term averages.
3. Risks and conditions
Jeremy Batstone-Carr of Raymond James said the bullish case for equities was not a “slam dunk,” and pointed to bond markets, central banks, energy prices and geopolitics as potential drivers. Stocker said solid profit growth and more balanced valuations could support further gains into year-end if earnings broadly meet expectations and management teams show progress on AI monetisation, productivity gains and underlying demand.
