LIVE MARKETS-Who's betting on an earnings boost for US stocks

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WHO’S BETTING ON AN EARNINGS BOOST FOR US STOCKS

Some market participants are cautious on equities as they expect earnings to grow but are uncertain about whether companies can keep surprising on the upside.

According to UBS Global Wealth Management chief investment office, volatility remains likely, but there is room for US equities to move higher amid still-strong profit growth.

With AI-related spending estimated to rise 84% this year to $900 billions, UBS expects semiconductor profits alone to account for about half of S&P 500 earnings growth in the third quarter.

Christian Stocker, lead equity strategist at UniCredit flags that the valuation backdrop has improved. The S&P 500’s 12-month forward price/earnings ratio has declined from around 23 at the start of the year to roughly 19 today, bringing valuations back in line with long-term averages.

“The bullish case for equities is no slam dunk,” Jeremy Batstone-Carr, economist at Raymond James, says.

While many investors still have room to add to stock positions, the bigger drivers may lie elsewhere, from bond markets and central banks to energy prices and geopolitics, he explains.

“If earnings broadly meet expectations and management teams continue to demonstrate progress on AI monetisation, productivity gains and underlying demand trends, we believe the combination of solid profit growth and more balanced valuations can support further equity market gains into year-end,” Stocker says.

(Stefano Rebaudo)

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