Market fundamentals still matter, even if everyone is watching earnings, says BlackRock's Mike Pyle

Summary

BlackRock's Mike Pyle argues that stocks are being driven by a race between earnings and interest rates, with particular focus on the long end of the rate curve. He sees upward rate risk because heavy capital-markets demand is stretching capacity, but also expects continued earnings support from a still-underbuilt capex wave. The eventual payoff would be a productivity-led relaxation of scarcity that could bring lower rates and a more positive equity environment.

• Stocks are viewed as a function of earnings and long-end interest rates.
• Lower long-end rates helped equities by improving discounted cash-flow conditions.
• Interest-rate risk is tilted upward because capital markets face heavy fiscal, corporate, household and mortgage demand.
• The capex wave is seen as underbuilt, not overbuilt, supporting ongoing earnings strength.
• AI capex and energy are highlighted as areas of current scarcity or bottlenecks.
• A future productivity payoff could relax scarcity, lower rates and strengthen equities.