Name: Earnings, Fed rate cuts to drive S&P 500 higher in 2026: Strategist
Uploaded: 2025-12-30T08:52:37.493Z
Duration: 3 min 57 s
Description: Suresh Tantia, Chief Investment Officer for Asia Equity Strategy at UBS Global Wealth Management, says concerns about an AI bubble keep investors cautious but also open opportunities when earnings are strong. He also provides his S&P 500 target for 2026, expecting double‑digit earnings growth and Fed rate cuts, regardless of who succeeds Jerome Powell as chair.

Suresh Tantia, Chief Investment Officer for Asia Equity Strategy at UBS Global Wealth Management, says concerns about an AI bubble keep investors cautious but also open opportunities when earnings are strong. He also provides his S&P 500 target for 2026, expecting double‑digit earnings growth and Fed rate cuts, regardless of who succeeds Jerome Powell as chair.

Wall Street

A strategist speaking on CNBC highlighted that concerns about an AI bubble, driven by significant capital expenditures and uncertain monetization, are more pronounced in the U.S. than in Asia. However, these concerns are seen as providing opportunities for investors if companies deliver strong earnings, particularly as most AI investments are concentrated among a few large technology firms.

The strategist also noted that demand for metals, especially gold and silver, remains robust and is expected to rise further, partly due to their increasing use in technology and data centers. Looking ahead to 2026, the strategist identified potential risks such as tariff-related Supreme Court cases, possible government shutdowns, and changes in Fed leadership, but maintained that strong earnings growth and anticipated Fed rate cuts could push the S&P 500 to 7,700 by the end of the following year.

Earnings, Fed rate cuts to drive S&P 500 higher in 2026: Strategist

Something shifted around that AI bubble conversation where people are more convinced that there is an AI bubble. I think people are concerned about a lot of the CapEx investment done by companies in the AI space and people are not able to see the monetization of that. That's why there seems to be a bit of concern but this is actually not a bad news, it's a good news. It keeps everybody on their toes. The company is increasing in the space. Yes. And also I think it also provides investors a wall to climb because if you don't see these concerns materializing, eventually during the earning season investors are going to buy these stocks as the companies deliver on earnings. And the good news is that in the AI space most of the CapEx is being driven by top five to seven mega cap technology names. Yeah but they're working differently now, they're diverging, they're not converging in those same way. That's something that I found interesting. I had one question about the fact that if you had to measure the bubble concerns in the U.S. and in Asia, is there a way to do that? Like is there greater concern in the U.S. than in Asia amongst traders? Yeah there seems to be more concern in U.S. because when you look at the entire AI space, Asia is at the front and center of the infrastructure build-up. Okay. So the companies that you find in Asia are into the chips industry and there is a shortage of chips right now. That's why Korea and Taiwan have done so well this year. On the other hand in U.S. these are the company or customers of these companies in Asia who are actually buying chips and building their network. Okay is there an AI bubble or a metals bubble? I don't think there is a bubble bubble as such because if you look, there's an inelastic demand for metals. Okay. When you talk about gold, silver, they're always buyer. You'll hardly find any sellers in the precious metal space. Households have been buying, central banks have been buying and now the ETF investors have been buying. Okay but what just happened with silver? 7% down and like that? Well on Friday we saw 11% rally so it's just a you know back and forth but we are still sitting at 100 plus gain for the year. Yeah. And precious metals tend to be very volatile especially silver. Okay. But we still expect both silver and gold prices to go higher. How much? So gold, I think bull case it's quite possible that you could see 4700 next year. I wouldn't be surprised if it goes higher given the strong demand and the fact that Fed is still going to cut rates. Okay but not silver? Silver is gonna follow gold as well. Okay but not as much? I think silver is quite possibly outperform gold because silver tends to be more high beta part of the precious metal space. But it's connected to AI now. Everyone's talking about that much more than they were in the past. That's absolutely because if you look at any metal that's now being used in the data center in the AI space. So that's the incremental demand coming in and it's just not silver. You look at copper prices also. Despite the fact that China has been weak, copper prices have been going higher. Because now copper is being used in EV and data centers. Okay, 2026 the overhang of the following. The Supreme Court case on tariffs, the possibility of another government shutdown and the Fed chair appointment where the market could be punishing if they feel that it's not an independent chair. I think at the margin it's quite possible that any of these risks materialize. You could see a short pullback in the market. But we have to focus on the fundamentals. And the two things which still support the markets. Number one, the earnings next year next year would be up double digit. And secondly, the Fed is still going to cut rate irrespective of who is the chair. Because economy is moderating, inflation is not a big concern at the moment and real rates are still high. So as long as Fed is cutting rate and earnings are coming through, the equity market can go higher. That's why we expect S&P to go to 7700 by the end of next year.

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