Hightower's Stephanie Link: We're in the early stages of the AI boom
Speakers
Stephanie Link
— Chief Investment Strategist, Hightower
Summary
Stephanie Link, chief investment strategist at Hightower, sees a broadening equity market driven by a healthy economy and the early stages of an AI boom. She highlights that seven sectors posted double-digit earnings growth last quarter and expects upside in S&P 500 earnings. She advocates owning technology alongside industrials, financials, and especially consumer discretionary, which benefits from sharply lower oil prices.
- U.S. economy is healthy, led by the consumer and the AI revolution.
- Seven of 11 S&P 500 sectors had double-digit earnings growth last quarter but technology absorbed the attention.
- The AI boom is still in its early stages and is benefiting multiple sectors.
- S&P 500 earnings are running well ahead of initial 10–12% growth expectations, with 26% last quarter and a projected 20% for the year.
- Market broadening means investors should own technology but also industrials, financials, and especially consumer discretionary.
- Oil prices down 40% from highs provide a strong tailwind for consumer discretionary.
- Inflation has peaked and is declining, which is positive for consumers and business input costs.
- The 400 S&P 500 earnings estimate for 2027 could support significantly higher index levels if multiples hold.
Ideas
S&P 500 earnings growth upside likely.
The economy is healthy, led by the consumer and the AI revolution, which is causing a market broadening beyond technology. Seven of 11 sectors had double-digit earnings growth last quarter, but technology took all the credit. The early stages of the AI boom and peak inflation with falling rates support upside in S&P 500 earnings—26% last quarter, likely 20% this year—so the index still has room to run.
Technology benefits from AI revolution.
Technology remains a core holding because the AI revolution is still in its early stages, and the sector continues to lead earnings growth even as other areas improve.
Financials benefit from market broadening.
Financials should participate in the broadening rally as earnings growth spreads beyond technology, supported by a healthy economy and manageable inflation.
Discretionary gains from lower oil prices.
Consumer Discretionary is especially attractive because oil prices are down 40% from their highs, giving consumers extra spending power and improving margins for businesses in the sector.
