CIO remains positive on the outlook for equity markets overall, underpinned by resilient economic growth, supportive fiscal and monetary policies, and robust earnings growth. (UBS)
With hyperscalers on track to divert nearly 100% of their free cash flow to capital expenditure this year—up from a 10-year average of around 40%—concerns are rising that capex is now growing too quickly and could present a threat to the bull market. The use of leverage—both public and private—to finance this expansion has the potential to amplify volatility. While such fears may be exaggerated, the uncertainty has been making some investors less willing to pay historically elevated multiples for tech stocks.
With this worry weighing on US stocks, investors will be looking to see if this narrative shifts this week and beyond. We remain positive on the outlook for equity markets overall, underpinned by resilient economic growth, supportive fiscal and monetary policies, and robust earnings growth. And we will be looking for further evidence of this resilience in the coming week from the February jobs data, which is expected to show continued stabilization after a strong release for January. The ISM business activity surveys for February should also be encouraging.
Nevertheless, we expect uncertainties over the tech outlook to persist, and our assessment is the risk-reward profile in the sector has become more balanced. Against this backdrop, we recently downgraded US information technology and communication services from Attractive to Neutral. However, this is part of a broadening of the stock market rally, including a more positive outlook for industrials. We still expect the S&P 500 to reach 7,700 by the end of 2026—propelled by 12% earnings per share growth for the index.
Original report: Weekly Global: What to watch in the week ahead, 2 March 2026.
