The Case for Staying Bullish on Equities

The U.S. equity market is transitioning from a rolling recession into a rolling recovery, a shift that remains underappreciated by investors focused on past risks. Despite recent volatility, the 12-month S&P 500 price target has been raised based on a 5% increase in earnings forecasts and a robust 22% earnings revision breadth. This bullish outlook stems from accelerating earnings growth and a broadening CapEx cycle, contrasting with typical late-cycle oil shocks where earnings usually contract. While AI adoption is slower than anticipated, it currently serves as a margin tailwind by encouraging leaner hiring practices and enhancing profitability. Although rising interest rates and ebbing liquidity present short-term vulnerabilities, strong earnings growth historically allows for solid returns even without Federal Reserve rate cuts. Investors should view market corrections as opportunities to increase exposure to industrials, financials, and consumer discretionary sectors positioned to benefit from the ongoing economic broadening.