Equities

Strong results and constructive commentary from the US’s largest banks are encouraging: Consumers remain in solid shape, and the macro backdrop continues to favor equities. The outlook for the largest banks is positive, and they are unlikely to be affected by isolated credit events.

Broad GenAI adoption and monetization, alongside falling inference costs, should make hyperscalers’ and enterprise investments worthwhile. While the GenAI boom echoes the dot-com era, it differs in key ways: Valuations are elevated but not extreme, and the rally is still underpinned by solid earnings growth. With few warning signs flashing red, the bull market likely has further to run, though a period of consolidation is overdue.

The economy remains resilient despite a softening labor market. As the economy shifts from labor toward capital, we may be in the early stages of a “jobless boom.” Our bull case for equities rests on strong earnings growth, accelerating GenAI adoption, monetary easing, and stimulus from OBBBA. Key risks we continue to monitor are rising bond yields and the threat of stagflation.

Special Report

Real Estate performance is contingent upon the Fed rate-cutting cycle. Yet, we worry about a hawkish Fed surprise and are closing our overweight in the sector. We also recommend a granular approach to subsector selection.

Special Report

In this report, penned by BCA’s Global Investment Strategy team, our colleagues examine a wide range of strategies designed to capitalize on stock market anomalies. GIS will be using a mixture of these strategies for its new PowerTrades service.

According to our latest client poll, most respondents are optimistic about the Generative AI's potential. Investors remain divided on whether current equity valuations reflect a bubble. Economic concerns continue to center on bond yields and the risk of stagflation, while relatively few clients anticipate a recession. In terms of portfolio positioning, an overweight in Technology received the strongest endorsement.

The economy is slowing, but not collapsing, and monetary easing is imminent — a backdrop that will benefit equities. We remain strategically bullish, with a close eye on GenAI and resilient earnings, even amid numerous risks. However, we are tactically cautious, as seasonality, elevated valuations, and stretched technicals present near-term headwinds.

Special Report

The resilience of US non-tech companies' profitability has not been driven by top-line growth but by falling costs, which safeguarded profit margins. Presently, risks in US stocks outweigh the potential rewards – margin sustainability is uncertain while equity valuations are very stretched.

GenAI momentum is building. Many companies are already reaping benefits from the technology. GenAI is disrupting entire industries, such as education, image generation, and staffing. Investors should prefer our “disruptors” basket over the “disrupted” basket.

The Q2 earnings season delivered solid earnings and sales growth and resilient margins, reassuring investors that corporate America remains in good health and is capable of navigating economic uncertainty while mitigating the impact of new trade levies. The outlook is generally positive, but with one important caveat: The full effect of tariffs has yet to materialize.