Inflection Points: The Spooked Earnings-Driven Market

Strong earnings and broadly resilient economic conditions support further equity gains despite unusually cautious investor sentiment.

• Companies have delivered the fastest pace of mid-cycle earnings growth in 40 years, while large-cap equity multiples on 2026 and 2027 earnings have contracted from the start of the year.
• The Bloomberg recession indicator is at 20%, nominal GDP growth has accelerated, real GDP has remained broadly steady, and consumers continue to spend despite inflation.
• About one-third of S&P 500 stocks are at least 20% below their 2026 highs, but roughly two-thirds remain positive year to date and 70% of those are up more than 10%.
• Forecasts call for 80% of S&P 500 companies to post positive year-over-year quarterly earnings growth, with 140 companies expected to deliver EPS growth above 30%; the current 2026 earnings-growth estimate is 25%.
• Economists project investment growth of about 3.8% through 2027 and 2028, while corporate forecasts imply a much larger capex increase through 2027 before growth moderates in 2028.

Takeaway: The author favors continued equity-market gains and sees potential entry points in corrected themes such as uranium, lithium, industrial mining, defense, data centers and digital infrastructure, but warns that the sustainability of the AI capex cycle, inflation, higher rates and geopolitics could determine whether the thesis holds.