Good morning. Alphabet and Tesla reported earnings that disappointed markets, with late‑trading falls of about 4 %. The shock was sharper for Alphabet, where Google Cloud revenue leapt 82 %. Tesla’s operating income fell by more than half, underscoring the short‑term pain.

The bull case remains, but only after a cautious reset. Valuations, growth expectations, bullishness and leverage are all high, so the S&P 500 is expected to deliver below‑average returns in the next few years. Still, the best support is the outstanding profits of the largest U.S. companies. Ed Yardeni’s highest price target of 8,250 for the end of this year—10 % above the current level—illustrates that earnings estimates are climbing sharply.

AI mega‑investment is the next catalyst. Wall Street expects capital outlays at the six big AI spenders—Google, Amazon, Alphabet, Apple, Space X and Oracle—to average about a trillion dollars a year between 2026 and 2028. If those investments deliver solid returns, the big‑cap tech stocks and chipmakers should rally.

Interest rates will play a decisive role. Low and stable rates, driven by a cooling Iran conflict and falling oil prices, would ease equity pricing. However, high inflation and a tight labor market could push rates up, forcing bulls to seek alternative support.