"Company profits continue to exceed expectations!" Tariffs trigger sell-offs but do not shake Wall Street confidence: AI will drive US stocks higher.

Last Friday, President Trump of the United States claimed that he would impose huge tariffs, causing selling in the stock market. At the same time, the banking industry is about to start the earnings season, and the current stock market is still hovering near historic highs. Wall Street is looking forward to the continuation of the outstanding performance of the AI-driven market this year. Since the low point in April, the S&P 500 index has risen by more than 30%, an increase of about 1800 points; during the same period, the Nasdaq Composite Index has increased by about 50% - this stunning rebound lasted for six months. According to FactSet data, Wall Street expects the earnings of companies in the S&P 500 index to grow by 8% year-on-year in the third quarter, and if this goal is achieved, it will mark the ninth consecutive quarter of earnings growth for these companies. During this earnings season, the proportion of technology companies raising earnings expectations is higher than any other industry, with software and semiconductor companies contributing to most of the positive outlook. Recently, the heavyweight collaboration reached between the developer of ChatGPT, OpenAI, and chip manufacturer AMD (AMD.US) has once again sparked controversy over whether the current market is in a pure bubble. Lisa Schreiber, an investment analyst at Gradient Investments, said last week, "The current market valuation is high, so it is necessary to take a closer look at this situation." "But I do not think we are currently in a bubble state because the fundamentals of companies are solid, and the earnings of these companies have been exceeding expectations every quarter." Nicholas Colas, co-founder of DataTrek Research, pointed out in a recent report that the current dynamic price-to-earnings ratio of the S&P 500 index (based on expected earnings this year) is about 25 times, reflecting the market's full confidence in the standard of corporate earnings and even includes expectations for better-than-expected results. Analysts from Goldman Sachs Group, Inc. also stated last week that the market has not yet entered a bubble, as "leading companies with price increases generally have exceptionally strong balance sheets." Meanwhile, analysts from UBS Group AG predict that capital expenditures in the global artificial intelligence field will increase by 67% year-on-year by 2025. The strategy team of UBS Group AG wrote in a report on Thursday, "In our view, this round of market rebound is still supported by three major factors: solid corporate fundamentals, accelerated penetration of AI applications, and overall positive macroenvironment. Investors should consider gradually increasing their positions during any market pullback." However, there have been almost no opportunities for a "buying on the dip" correction in the market so far. Core sectors of the artificial intelligence boom, including the technology sector, the communications services sector, the utilities sector, and the industrial sector, are all hovering near historical highs. And Wall Street strategists continue to raise their target points for the S&P 500 index. However, not everyone is convinced. Jim Masturzo, Chief Investment Officer of Research Affiliates Multi-Asset Strategies, said, "In our view, the US stock market is still overvalued, and this overvaluation has persisted for a long time." He added, "We are beginning to feel that investors are hoping for lower interest rates and monetary policy adjustments, believing that these factors can support the current market trend." The latest policy meeting minutes released by the Federal Reserve on Wednesday showed that if the labor market remains weak, officials tend to cut interest rates again this month and may cut rates again before the end of the year. The loose monetary policy environment and the high stock market may have alleviated consumer concerns to some extent. Delta Air Lines, Inc. (DAL.US) released its earnings report last Thursday, showing growth in both premium travel and domestic flight services; in the first half of this year, due to unfavorable factors related to tariffs, demand for business travel was soft, but this business has rebounded. Ed Bastian, CEO of Delta Air Lines, Inc., said, "I am pleased to inform you that business in the third quarter has rebounded rapidly, and the company is steadily progressing towards its annual goals." Nevertheless, Wall Street is still closely monitoring any signs of pressure on consumers. Last Friday, President Trump announced that starting in November, additional tariffs of 100% would be imposed on Chinese goods. While companies faced challenges before, the overall environment was still manageable; this move has added new uncertainty to the market. Cindy Beaulieu, Chief Investment Officer of Conning North America, said, "We have not yet seen a significant transmission impact of tariffs on inflation." "This means that some companies are under pressure in responding to tariff shocks, and there has been a certain degree of margin compression. Therefore, the third quarter earnings growth of companies may slow down slightly, but there are no risks significant enough to trigger an alarm."