By Michael Brush
Consumers will keep spending, AI and tech aren’t in a bubble, and there’s opportunity in Europe
Market experts say the bull has room to run.
Now that America’s CEOs have finished their second-quarter earnings updates, it’s time to step back and assess what they told us about where the U.S. stock market is heading.
To find out, I checked in with five market experts who, along with their analysts, manage more than $67 billion. That’s a lot of brain power drilling down on SEC filings and checking in with management at companies across the economy.
Here are their high-level takeaways:
— The bull market has room to run because the U.S. isn’t about to go into a recession.
— American consumers will continue spending.
— Tariffs probably won’t drag down the economy as much as feared.
— AI is not in a bubble, and businesses will continue to deploy AI to boost profits.
“We didn’t find a lot to not like in second-quarter earnings reports,” said Nancy Tengler of Laffer Tengler Investments.
Here’s more detail on the key outlooks these investment managers shared, and the stocks they expect to benefit from the economy’s current growth trends:
1. No U.S. recession: As jobs numbers weaken, economists worry the U.S. is heading into a recession, which can trigger a bear market. But this isn’t likely anytime soon.
One reason is that corporate results were so strong. Companies blew away estimates, including at economically-sensitive cyclical names. “The first half was in many ways remarkable,” said Ed Yardeni of Yardeni Research. “Earnings growth was much better than analysts expected. The economy is doing much better than was widely feared.” He cited strong capital spending and productivity growth as two more reasons to rule out recession.
Also, many companies raised earnings guidance. This is important at a time when various data gives conflicting economic reads. Said Tengler: “I don’t see a recession or stagflation.” Tengler is worth listening to because her “12 Best Ideas” strategy has topped the Dow Jones Industrial Average DJIA by more than 10 percentage points over the past three years.
2. Growth isn’t just about AI and the ‘Mag Seven’; it’s widespread: Bears tell us that beyond AI and the so-called Magnificent Seven Big Tech stocks, there’s not much action in the economy. But the second quarter proved them wrong.
“It was encouraging to me that a number of industries contributed to strong earnings and revenue growth,” said Jeremiah Buckley, manager of the Janus Henderson Balanced fund JBALX. The broad-market strength is one reason he also sees no recession near-term. Buckley is worth listening to because his fund has outperformed its Morningstar category by more than two percentage points annualized over the past three years.
Buckley cited strong results from Booking Holdings (BKNG), Delta Air Lines (DAL), Boeing (BA), Howmet Aerospace (HWM) and GE Aerospace (GE). Their results reflect healthy consumer and business spending, a positive signal for the economy. He also singled out strength at investment banks Goldman Sachs Group (GS) and Morgan Stanley (MS), and at medical technology companies Stryker (SYK) and Intuitive Surgical (ISRG).
3. There’s no AI bubble: AI infrastructure-spending growth at the hyperscalers is alive and well, said Jake Seltz, who helps manage the Allspring LT Large Growth exchange-traded fund AGRW. “There is still an arms race to come up with the best products,” he said.
Seltz noted that hyperscalers raised capex-spending guidance by several billion dollars each. By his estimate, Alphabet (GOOG) (GOOGL), Microsoft (MSFT), Meta Platforms (META) and Amazon.com (AMZN) boosted second-quarter AI capital-spending estimates 14% to $352 billion from $310 billion in May. One of the big beneficiaries of course is Nvidia (NVDA), which Seltz said is not overvalued.
“AI spending has gotten through its DeepSeek moment,” said Travis Prentice, chief investment officer at the Informed Momentum Co. DeepSeek initially appeared to provide AI at a much lower cost, but it turns out the Chinese AI company cut corners.
Prentice cited solid second-quarter results from AI arms dealers Broadcom (AVGO) and Ciena (CIEN). Other AI-related momentum stocks Prentice likes include Comfort Systems USA (FIX), Credo Technology Group Holding (CRDO) and Lumentum Holdings (LITE), which all provide parts, services and tech components for data centers.
Prentice helps manage the American Beacon IMC International Small Cap Fund TIVFX, which has outperformed its Morningstar foreign mid-cap growth category by seven percentage points over the past year.
4 . Companies continue to confirm AI is real – by using it to boost profits: Skeptics question whether companies really have any use for AI. But companies keep spending and proving them wrong. Second-quarter S&P 500 SPX operating-profit growth came in better than expected due to productivity gains produced in part with AI, Buckley said.
Here are some examples:
— JPMorgan Chase JPM and Morgan Stanley use AI to improve fraud detection and customer services.
— Trane Technologies TT, Eaton Corp. ETN and GE Aerospace use AI to monitor equipment to figure out when it needs servicing. These companies are growing earnings much faster than revenue, as a result.
— Healthcare companies Amgen AMGN and Eli Lilly LLY use AI to help identify potential drugs and design trials.
— Goldman Sachs now hires fewer associates because it can use AI to write basic financial offering documents, Tengler said. “If they can do that with fewer employees, the leverage becomes powerful,” she said.
5. The U.S. consumer is OK: “Strong retail reports confirmed that consumers are alive and well. They are not retrenching,” Yardeni said. This is key, because the U.S. consumer drives the economy. Prentice singled out strong business momentum at cruise lines Royal Caribbean Group (RCL) and Carnival (CCL), along with Expedia Group (EXPE) and Booking. Meanwhile, Walmart (WMT) and other retailers noted strength among wealthier consumers, but spending weakness among lower-income consumers.
6. European economies are back: “Europe has strong momentum overall, which we haven’t seen for a long time,” Prentice said. He cited solid results at defense and aerospace companies Rolls-Royce Holdings (RYCEY), Rheinmetall (RNMBY) and Saab (SAABY) as European nations ramp up defense spending.
Europe’s banks also stand out for positive business and stock-price momentum. Here Prentice singled out Deutsche Bank (DB), National Bank of Greece (NBGIF), Alpha Bank (ALBKY), Banco Santander (SAN) and Banca Mediolanum (BNCDY).
Michael Brush is a columnist for MarketWatch. At the time of publication, he owned BKNG, GOOGL, MSFT, META, AMZN, AVGO, RCL and CCL. Brush has suggested BKNG, DAL, BA, GS, MS, GOOGL, MSFT, META, AMZN, AVGO, JPM, AMGN, LLY, RCL, CCL, EXPE and WMT in his stock newsletter, Brush Up on Stocks. Follow him on X @mbrushstocks.
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Also read: Should you still invest in small-cap stocks after their big gains?
-Michael Brush
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09-25-25 1646ET
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