Global equities experienced a strong rebound, with major indices posting significant gains despite a recent Federal Reserve rate hike and expectations of further tightening. The S&P 500 advanced by 1.2%, the Nasdaq gained 1.7% in its best session since early August, the Stoxx 600 rose 0.9%, and the Kospi surged 2.7% at the time of reporting [1]. This rally was supported by robust consensus earnings growth of 35% for the year, with estimates continuing to trend upward, making a sustained equity sell-off or even a pause increasingly difficult according to Danske Bank's research team [1].
The AI-led rally was a standout feature, with semiconductor and memory stocks leading the advance. Notably, Intel, AMD, and Micron all rallied between 6-8% [1]. Big tech stocks also posted solid gains, reinforcing the strength of the technology sector in the current market environment [1].
Danske Bank advocates a barbell strategy, recommending overweight positions in global tech stocks with historical earnings growth and undemanding valuations, financed by underweighting global industrials. Industrials were among the weakest performers despite the broader risk-on backdrop, which may indicate increasing selectivity among investors as valuations in the sector remain elevated despite weaker earnings [1].
The research team concludes that the gravitational force on equities remains higher, and the combination of strong earnings growth and contracting valuation multiples provides a cushion against higher interest rates [1].
CONCLUSION
Global equities have rebounded strongly, driven by robust earnings growth and an AI-led rally in technology stocks. Despite recent Fed tightening, market sentiment remains positive, with analysts advocating a selective approach favoring tech over industrials. The outlook is supported by rising earnings estimates and resilient market performance.