AI and Jobs: What Data and History Say

Summary

Mike Wilson explains that earnings strength is broadening beyond tech and is the key driver supporting equity markets despite valuation resets and geopolitical risks. He argues that improving earnings breadth and pricing power offset headwinds, leading to a bullish outlook for US equities with intermittent volatility.

• Earnings growth at 16% for the typical S&P 500 company, with a 6% median surprise, the strongest in four years.
• Earnings revisions are expanding beyond tech into financials, industrials, and consumer cyclicals.
• Geopolitical risks (Iran, oil) are being absorbed at the company level, leading to uneven impacts.
• Energy has become a positive contributor to earnings growth, partially offsetting input cost pressures.
• Valuations corrected 18% from last fall's peak, but earnings acceleration has stabilized equities.
• The Fed's rate repricing (fewer cuts, possible hikes) is a headwind but not overwhelming the earnings story.
• Liquidity remains a risk, but strong earnings are more than offsetting those concerns.
• Wilson expects the US equity market to grind higher for the rest of the year with intermittent volatility.