US MARKETS CALL: S&P 500 Valuation Dives As Earnings Soar

The stock market dived last week. Investors priced in political backlash against data centers after Democrats swept Congress. We anticipated buying opportunities after the midterm elections, and Thursday’s selloff delivered some. This remains an earnings-led bull market. Valuations are falling while earnings are soaring. We still view the AI backlash as another speed bump, not a roadblock. We are sticking with our 7,900 year-end target for the S&P 500.

I. Performance

The Nasdaq entered correction territory on Thursday and closed the week below its 200-day moving average (chart). It has done this before recently. It rebounded sharply after its Spring 2025 “Liberation Day” plunge and again after the Iran war started earlier this year, quickly resuming its uptrend both times.

The equal-weight S&P 500 is holding up remarkably well. It remains near its recent record high and above both its 50-day and 200-day moving averages (chart). The damage has been concentrated in the AI trade, not the broader market.



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