That is The Takeaway from at present’s Morning Transient, which you’ll be able to enroll to obtain in your inbox each morning together with:
Final week, fears over the US financial system slowing greater than initially thought took middle focus as the key indexes skilled the worst single-day drop of the summer time.
That was the headline takeaway from the busiest week of knowledge releases slated for the summer time of 2025.
However beneath the floor, there are nonetheless loads of causes to really feel assured within the path greater for the S&P 500 (^GSPC), in line with Wall Avenue strategists — a confidence that appeared to roar again on Monday because the S&P 500 jumped 1.5%.
Apart from the dour jobs report, traders additionally discovered that the S&P 500 is pacing for year-over-year earnings progress of 10.3%, effectively above the 5% anticipated getting into the reporting interval, per FactSet information.
On high of that, we heard Huge Tech giants say they’re set to spend one other $364 billion in AI investments throughout 2026, and third quarter earnings estimates for the S&P 500 weren’t slashed through the first month of the quarter for the primary time in over a yr.
In different phrases, whereas the US financial progress story is taking hits, the elemental driver of the AI-driven bull market is completely cooking. That made Mike Wilson and the fairness technique group at Morgan Stanley declare “we’re patrons of pullbacks,” and that the group is bullish over the following 12 months.
“Whereas there’s threat within the near-term, we’re gaining confidence in our 12-month bullish view fueled by higher earnings/money movement progress,” Wilson wrote. “The drivers embody optimistic working leverage, AI adoption, greenback weak spot, money tax financial savings from the [One Big Beautiful Bill], straightforward progress comparisons, and pent up demand for a lot of sectors available in the market.”
BlackRock’s Funding Institute, led by Jean Boivin, wrote in a weekly market commentary observe that there’s a clear “tug-of-war” between the financial drag of tariffs and US company resilience pushed by AI.
They, too, are taking their sign from the latter.
“Questions stay about who can pay for tariffs,” Boivin’s group wrote. “Early indicators point out a mixture of shoppers and firms. We predict US company power may cushion the blow and keep obese the AI theme and U.S. shares.”
In a analysis observe summing up earnings studies seen from greater than two-thirds of S&P 500 firms this quarter, Financial institution of America Securities head of US fairness and quantitative technique Savita Subramanian wrote that the “AI arms race is alive and effectively.”
