Reverse buy signal flashing! Investment bank Cantor Fitzgerald: AI panic creates a golden pit, fundamentals will support the continuation of the US stock bull market

The latest report from investment bank Cantor Fitzgerald indicates that after investors pulled out of the market due to concerns over the disruptive power of artificial intelligence (AI), the current environment creates an ideal setup for further gains in the U.S. stock market. The firm points out that a surge in put option purchases, rising fear gauges, and declining optimism are typical contrarian buy signals. Meanwhile, fundamentals such as earnings exceeding expectations and stock buybacks remain strong. Analyst Eric Johnston stated, “Given the solid fundamental backdrop, this provides a very good setup for the next upward phase.”

Since 1955, Cantor Fitzgerald analyzed data and found that in 21 years when GDP growth exceeded 2.25% and the Federal Reserve did not raise interest rates, the S&P 500 index rose every time, with an average return of 19.6%. Johnston noted that due to the surge in AI spending (“Big Seven” capex jumping from $382 billion to $650 billion), reshoring of manufacturing, tax cuts contributing 90 basis points to GDP, and the Federal Reserve’s accommodative policies, the likelihood of such a scenario occurring by 2026 is “very high.”

Currently, Cantor Fitzgerald is optimistic about large tech and software stocks, which have recently been battered by cash flow concerns and AI disruption risks but are now oversold. For example, the Nasdaq’s price-to-earnings ratio relative to earnings growth is at a 10-year low, and the “Big Seven” stocks have outperformed the S&P 500, yet their relative strength index (RSI) is only 23.75, indicating undervaluation. Strategists also point out that with wages, housing costs declining, and tariffs’ impact waning, inflation is cooling, and they continue to hold bonds as a prudent hedge.

Additional broader positive factors include: the S&P 500 earnings per share (EPS) forecast rising to $320; profit margin expansion in equal-weighted indices driven by AI; narrowing budget deficits (down to 5.2% of GDP in 2025); weak employment growth outside the healthcare sector; and strong consumer sales. Furthermore, after recent de-risking, Eric Johnston and his team remain “bullish on Bitcoin,” believing that loose monetary policy and liquidity winds will provide support.