Wells Fargo’s top equity strategist says corporate America is poised to deliver another round of earnings beats this quarter.
In a new CNBC interview, Oshung Kwon says Wells Fargo’s machine learning models predict that AI-related firms will spearhead a Q3 earnings beat.
“We essentially looked through all the macro variables that we could find, about 350 macro variables, and we went through this machine learning process to figure out where the sales could be. And it’s still pointing to a pretty decent beat.
We’re forecasting about a 4% beat, led by AI, [semiconductors].”
Kwon says that while markets remain fixated on Federal Reserve policy, he notes one trade matters above all else.
“I think AI matters more than the Fed. For broadening, I think the Fed matters. Outside of that, I think it’s really more about growth.”
He also says that the market’s reaction to the Fed’s recent shift toward an easing cycle has already played out, with investors rotating away from interest-rate-sensitive sectors and back into AI.
“There was a lot of optimism heading into the FOMC that the Fed might be easing into a re-acceleration cycle. That’s when we saw really the easing cycle trade happening, whether it be the Russell [2,000] or the home builders. Now that we are in an easing cycle, officially, we’re seeing selling the news and rotating back into AI.
Outside of AI, I’m not really excited about anything.”
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