Capital Economics analysts argue the S&P 500 is poised for growth, citing robust 2025 corporate earnings. Tech sector gains, particularly from Nvidia, drove a 25% year-over-year increase in IT earnings—a pace faster than 2024. This performance, they note, provides a cushion against potential tech cooling, as healthcare, industrials, and financials strengthen. Aggregate earnings growth of 10%+ is projected for 2026, despite AI infrastructure spending concerns.

The firm highlights Nvidia’s outsized impact, with its earnings beat signaling broader market confidence. While AI disruptions threaten some software firms, analysts believe profits may shift to AI model providers and legacy software users. This dynamic, they say, mitigates broader market risks, allowing other sectors to offset tech volatility.

Valuations, currently flat for two years, could expand further. Capital Economics forecasts the S&P 500 will reach 8,000 by year-end, up from 6,946.13 as of Wednesday’s close. They attribute this to earnings momentum and sectoral diversification, suggesting investors should monitor AI’s long-term distribution of gains rather than short-term disruptions.

The analysts conclude that market resilience hinges on balancing tech optimism with broader sectoral health. Their stance contrasts with fears of AI-driven volatility, emphasizing instead the S&P 500’s structural strength amid evolving tech landscapes.