HSBC analysts say worries about large IPOs and stretched US equity valuations have been tempered by firm earnings growth across most S&P 500 sectors, with AI-related demand an important driver. They also point to earnings momentum broadening beyond Information Technology and Communications, while Energy and Materials are benefiting from data centre construction linked to the AI build-out.
The bank cites consensus forecasts showing 2026 earnings growth of more than 10% across most sectors, with 23% overall, while Consumer Staples and Real Estate are the exceptions. HSBC adds that the US is less exposed to downside risks from the Middle East conflict, and it retains an overweight view on US equities and a more bullish stance on the USD, alongside diversification into quality bonds, gold and alternative assets.
Broadening Impact Of AI And Equity Market Opportunity
We believe the solid earnings growth driven by artificial intelligence is spreading well beyond the big technology companies. With consensus S&P 500 earnings growth for 2026 forecast at 23%, we see any market weakness in the coming weeks as a buying opportunity. This suggests selling cash-secured puts on major indices like the SPY or QQQ during any pullbacks to collect premium and potentially enter positions at a lower cost.
The AI infrastructure build-out is now directly fueling demand in sectors like Energy and Materials to power and construct data centers. We’ve seen construction spending on new manufacturing facilities jump over 20% in the past year, which confirms this trend is having a real-world impact. Therefore, we find buying call options on sector ETFs like the Energy Select Sector SPDR (XLE) to be an attractive way to gain exposure to this broadening growth.
Options, Innovation Cycles, And Defensive Hedges
The CBOE Volatility Index (VIX) has been hovering near multi-year lows around 13, which makes option premiums relatively inexpensive for establishing bullish positions. We are looking at August and September 2026 expirations to position for a potential late-summer rally. This pattern is similar to past innovation cycles, like the late 1990s internet boom, where market leadership expanded well beyond the initial handful of tech stocks.
Our positive outlook on the US economy also leads to a bullish view on the US dollar, which supports domestically focused companies. Derivative traders can express this by purchasing call options on the Invesco DB US Dollar Index Bullish Fund (UUP). While our primary focus is on equities, we are also holding long-dated gold futures as a hedge against unforeseen geopolitical events.
