Is the US stock market's year-end rally stable? Nuveen: Giant profits will become the "stabilizing force" with AI still being the core engine!

Zhitong
2025.10.10 00:10
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Saira Malik, Chief Investment Officer of Nuveen Asset Management, stated that the U.S. stock market is expected to continue rising before the end of the year, primarily benefiting from the robust earnings of large technology companies. She pointed out that the fourth quarter typically performs strongly, and the S&P 500 has risen 35% since April. Despite growing concerns about a stock market bubble, strong corporate performance will support current valuations. It is expected that the profits of S&P 500 constituents will grow by 7.4% in the third quarter

According to the Zhitong Finance APP, the Chief Investment Officer of Nuveen Asset Management LLC stated that the U.S. stock market is likely to continue its upward trend before the end of the year, with robust corporate earnings—especially from mega-cap tech giants—continuing to drive stock prices higher.

Saira Malik pointed out in an interview on Thursday that the fourth quarter is "typically a strong performing quarter for the stock market, especially after a significant rise year-to-date. Therefore, the probability of the current rally continuing is relatively high."

Since hitting a low on April 8, the S&P 500 index has surged 35% amid easing trade tensions, a surge in artificial intelligence (AI) enthusiasm, and rising expectations for further interest rate cuts by the Federal Reserve. Tech giants in the AI sector, such as NVIDIA (NVDA.US), Google (GOOGL.US), and Broadcom (AVGO.US), have been the main drivers of this rally. The index has set new records 33 times this year and is currently hovering near historical highs.

Although this rally has pushed stock market valuations above historical levels and raised concerns about a stock market bubble, Malik believes that strong corporate performance is sufficient to support current valuations. She expects that with the upcoming third-quarter earnings season starting next week, corporate earnings will once again exceed market expectations. Analyst data shows that S&P 500 constituent companies are expected to see a 7.4% increase in profits for the third quarter, which would be the smallest increase in two years.

Malik stated, "If we explore the core drivers behind the rise in tech stocks, we find that it is primarily driven by earnings growth rather than reliance on valuation increases."

She further pointed out that a few large companies with stable earnings that dominate the AI sector "are another positive factor for the tech sector's potential to continue performing well."

For investors who are cautious about valuations (the current expected price-to-earnings ratio for the S&P 500 index is 22.9 times, compared to a 10-year average of 18.8 times), Malik suggests focusing on sectors outside of chip manufacturers in the AI field, such as data center-related companies.

Of course, bears can list numerous potential risks, including the U.S. government shutdown leading to interruptions in economic data releases, while investors still need to contend with uncertainties arising from unclear labor market health.

However, historical data supports Malik's optimistic assessment of the year-end market. According to records from the Stock Trader's Almanac since 1950, when the S&P 500 index reaches a historical high in September (as it did this year), the average increase in the fourth quarter can be as high as 4.8%

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