Rudi's View | 5:03 PM
In today's edition:
- AI To The Rescue
- All-Weather Or Not?
- RBC Likes Zip Co
By Rudi Filapek-Vandyck, Editor
AI To The Rescue
Equities are climbing the proverbial wall of worries in 2026 and AI is one key factor helping them to do so.
With uncertainty remaining as to what exactly is the situation in the Middle East --see also: Schroedinger's Strait-- and inflation stubborn while central banks are expected to tighten, there's plenty to worry about for investors.
Did anyone mention parabolic share price moves in selected winners?
All in all, this year's playbook very much reads like AI To The Rescue, authored by many a market strategist. ANZ Bank's freshly released update on Asia very much resembles that thesis and sentiment.
Think of it in terms of your traditional economist set-up: on the one hand there are lots of risks and headwinds at work, including further upside for inflation even if the Strait of Hormuz opens tomorrow, but the other hand holds an AI supercycle that is powerful enough to overwhelm the negatives.
ANZ Bank has upgraded its 2026 GDP forecast for the region to 5% from 4.8% prior. Taiwan, South Korea, Singapore and Malaysia have been identified as this year's standout economies; all are major beneficiaries from exposure to semiconductors (chips) and AI.
BCA Lauds Strong Earnings Momentum
ANZ Bank's confidence was mirrored during BCA Research Chief US Equity Strategist, Noah Weisberger's online presentation to investors in Asia on Thursday morning Australian time.
Weisberger's view is earnings growth for American companies is currently so strong --with Q1 results handsomely beating his own and broad market expectations-- that it will take quite a big setback to stop the current uptrend into year-end.
A little bit of extra inflation or unexpected delays in the USA-Iran negotiations might temporarily trigger pullbacks, but strong earnings support should prevail.
He has history on his side.
BCA Research has now lifted its year-end target for the S&P500 to 8100, i.e. circa 10% more upside on top of gains already achieved year-to-date.
Among the question marks noted is how investors will treat hyperscalers now they are spending all their cash flows on AI capex. As Weisberger explained, this oversized spending weighs on these companies' return on equity (ROE), which may or may not lead to de-rated multiples.
As long as revenue growth remains strong and margins are holding up, Weisberger doesn't seem too worried.
Besides, he pointed out, the rest of US Tech is still generating more cash than goes into capex. Apart from Technology, two other sectors remain firmly in strong earnings growth upgrade mode: Materials and Industrials.
All three sectors are overweighted in BCA's model portfolio.
Giant IPOs in 2026
BCA Research has analysed no fewer than 12,000 IPOs in the US, allowing Weisberger to address some investor myths and misconceptions on this matter.
Straight up: three-quarters of all IPOs have disappeared over time. When measured by median share price performance, IPOs generate a net negative return over 30 days, one year and three years after listing.
Historical research also shows a close correlation between positive market sentiment --measured by high P/E multiples-- and IPOs coming to market.
In the case of a big IPO wave --like the one this year with SpaceX listing and OpenAI and Anthropic likely to follow-- history also shows these large market entrants tend to depress the market's P/E multiple in the following year.
Normally, this would suggest US equities might be trading close to, or around, their peak this time around, but --no doubt you already guessed it-- with earnings momentum as strong as it is, the index is expected to continue trending upwards.
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