Investment bank Cantor Fitzgerald's latest report indicates that the current market environment, shaped by investor withdrawals due to concerns over artificial intelligence's disruptive potential, has created an ideal setup for further gains in U.S. equities. The firm highlighted a surge in put option buying, rising fear gauges, and declining optimism as classic contrarian buy signals. Concurrently, fundamentals such as earnings beats and stock buybacks remain robust. Analyst Eric Johnston stated, "Given the fundamentally strong backdrop, this provides a very favorable setup for the next phase of the market advance."

Cantor Fitzgerald's analysis of data since 1955 revealed that in all 21 years where GDP growth exceeded 2.25% and the Federal Reserve did not raise interest rates, the S&P 500 index posted gains, with an average return of 19.6%. Johnston expressed that the likelihood of this scenario materializing in 2026 is "extremely high," citing factors including a surge in AI expenditure (with the "Magnificent Seven" companies' capital expenditures jumping from $382 billion to $650 billion), onshoring of manufacturing, fiscal policies contributing 90 basis points to GDP, and anticipated Fed easing.

The firm currently favors large-cap technology and software stocks, which have recently been pressured by cash flow concerns and AI disruption risks but have reached oversold levels. For instance, the Nasdaq's PEG ratio is at a 10-year low, and while the "Magnificent Seven" have shown strong performance relative to the S&P 500, their Relative Strength Index (RSI) stands at just 23.75, indicating cheap valuations.

Strategists also noted they maintain positions in bonds, characterizing them as a prudent hedge, anticipating cooling inflation as wage growth and housing costs decline and tariff impacts fade. Broader positive factors include raised S&P 500 earnings per share expectations to $320; margin expansion in equal-weight indices driven by AI; a narrowing budget deficit (projected to fall to 5.2% of GDP in 2025); weak employment growth outside the healthcare sector; and robust consumer sales performance.

Furthermore, Eric Johnston and his team maintain a "bullish outlook on Bitcoin" following recent de-risking, expecting supportive tailwinds from loose monetary policy and liquidity.