Investment bank Cantor Fitzgerald is maintaining a positive outlook on US equities heading into year-end, with its analysts forecasting that technology shares will continue to drive market gains.
The firm's projection is underpinned by a steady stream of upward earnings estimate revisions and robust economic fundamentals, with artificial intelligence capital expenditure serving as the primary catalyst for further upside.
Analyst Eric Johnston highlighted in a recent research note that ongoing investment in AI infrastructure has propelled S&P 500 earnings expectations to record levels. Forward four-quarter earnings estimates for the index have now climbed above $389, driven largely by sustained AI-related capital outlays from major cloud computing firms and technology infrastructure companies.
Johnston argues that current market expectations for the third and fourth quarters of 2026 remain overly conservative, pointing to second-quarter earnings growth that exceeded 30% year-over-year as evidence that there is still significant room for further upward revisions.
On the interest rate front, Cantor anticipates that bond markets will stabilize from current levels. The recent rise in Treasury yields has been driven almost entirely by higher real yields and term premiums rather than rising inflation expectations. Johnston attributes this dynamic to increased corporate debt issuance for AI infrastructure projects, as well as uncertainty surrounding Federal Reserve Chair Kevin Warsh.
Notably, inflation expectations have remained stable despite rising oil prices. Johnston advises market participants against betting that the US Treasury will stand idle in the face of higher yields, noting that the department has already signaled its commitment to curbing further yield increases through "Operation Twist" — a strategy involving increased purchases of long-dated bonds.
The 10-year Treasury yield currently sits just 37 basis points above its three-year average, he noted, suggesting that the prevailing rate environment poses little threat to derailing AI data center investment plans. Despite the uptick in Treasury yields, financial conditions remain among the most accommodative seen in the past three decades, continuing to provide a tailwind for economic activity.
Futures markets have gradually aligned with Cantor's view that the Federal Reserve will maintain its current policy stance. Federal funds futures pricing now indicates only one rate hike for the year, with the probability of a September move sitting at just 39%. Core consumer price index growth has fallen below 2% on an annualized basis over the past three months, further reinforcing Cantor's assessment that even if the Fed eventually tightens policy, it would not signal the beginning of a sustained hiking cycle.
"We believe equities will continue to trend higher," Johnston stated, although he acknowledged that seasonal factors during the US midterm election year could present short-term headwinds in August and September.