BNY’s Bob Savage argues U.S. equities are being propelled by an unusually strong, AI-led earnings boom that is outpacing the broader economy and sustaining index gains despite macro headwinds. He notes that rising rates, higher Oil prices and weakening consumer dynamics could make the rally more selective, with valuations and market breadth becoming increasingly important.

AI boom drives but narrows equity gains

"U.S. equities are being driven by an unusually strong, AI-led earnings surge that is outpacing the broader economy and supporting index gains despite macro headwinds."

"AI-driven earnings surge is strong but narrow, with growth far outpacing broader economic activity."

"Rising real rates and energy shocks increase risk of tighter financial conditions and valuation pressure."

"Consumer weakness and margin pressures suggest potential demand slowdown despite resilient headline earnings growth."

"However, rising rates, energy shocks, and weakening consumer dynamics suggest the rally may become more selective, with greater sensitivity to valuations and market breadth."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)