Strong fundamentals and AI create exciting opportunities for 2026

US equities enter 2026 with solid momentum and a healthy dose of caution, as tariff tensions and questions around big tech, the consumer, and AI spending sit alongside record highs for the S&P 500 and broader sector participation. Beneath the headlines, earnings growth has strengthened meaningfully compared with the post‑crisis decade, with recent results showing double‑digit gains and a high share of companies beating expectations. While headline valuations appear elevated, much of this is driven by mega‑cap technology names; on an equal‑weight basis, market valuations look more reasonable, reinforcing that careful stock selection is critical.

Consumer behavior has so far remained resilient despite inflation concerns and policy noise, supporting a constructive backdrop for corporate profits. The AI theme adds both excitement and uncertainty: spending is surging and potential use cases span nearly every industry, but outcomes will be uneven. For investors willing to take a multi‑year view grounded in fundamental analysis, this environment offers rich opportunities to distinguish durable winners from those unlikely to earn their current valuations.