Episode summary
Tech Drags US Stocks as Silver Turns Volatile
Bloomberg Surveillance
· · Guests: Sean Simonds
Summary
Sean Simonds of UBS argues that 2026 markets should be driven by broader earnings rather than a narrow tech-led rally. He says the market can still advance, but a repeat of the past few years will be harder if mega-cap technology no longer does all the heavy lifting. His base case is a shift toward higher productivity, improving quality, and earnings breadth, especially in industrials rather than consumer cyclicals.
He is constructive on materials and industrials because margin expansion and earnings growth look more durable there than in consumer-facing businesses. Simonds pointed to consensus estimates showing better EBIT margin trends for names like Exxon and Amazon, while saying consumer sectors face a tougher path because their earnings gains depend more on sales growth and only modest margin improvement. He also said U.S. earnings for 2026 are near consensus for about 15% S&P 500 growth, with tech plus and the “big six” still running around 20% to 21%.
Outside the U.S., Simonds remains positive on European equities, especially European financials and banks. He said the firm is screening for quality, margin stability, and valuation relative to growth, and expects a rotation back into higher-quality stocks as investors focus on companies that are actually delivering earnings and operational efficiency.
Key takeaways
- Simonds said the biggest risk for 2026 is that the market realizes the AI trade is not as transformative as expected, which would challenge the recent tech-led pattern.
- UBS expects broader market participation next year, with industrials and other cyclical quality names favored over consumer cyclicals.
- He said 2026 S&P 500 earnings growth is close to consensus at about 15%, while tech plus and the big six are still tracking around 20% to 21%.
- Simonds is still positive on European equities, with European financials and banks singled out as a key area of strength.
- He favors a quality rotation built around margins, operational efficiency, and growth at a reasonable price rather than pure valuation expansion.
Notable quotes
“We are expecting more breadth for the market”
“If we don't have this massive tech led rally, the 20% number is more challenging to achieve”
“I think the biggest risk out there is just we realize it isn't all we thought it was going to be”
“We do see quality improvement and like I mentioned, we do see earnings breadth”
“We think the rotation back into higher quality is coming this year”
How the episode opens
We are expecting more breadth for the market. I feel like we've all been saying that for a number of years now, but that does kind of change the dynamic. If we don't have this massive tech led rally, the 20% number is more challenging to achieve.
I think we see kind of three key themes next year. One is going to be a high productivity. So actually companies, including these air air activities into their operations, finding that operational efficiency.
We do see quality improvement and like I mentioned, we do see earnings breadth. So that's focusing more on kind of the industrial rather than the consumer cyclical specifically. And that would be kind of our third major theme for next year.
How about if this air thing isn't a thing? I'm of the camp saying. I think the biggest risk out there is just we realize it isn't all we thought it was going to be.
And it's been the driver of returns for the past three years. And we've got to reverse that a little bit. Yeah, I, I don't know.
I think the probability of that being the outcome was far higher in 2023. I mean, I think there was a point in 2023 when we were all looking at this saying, is this the second coming of the Internet or is this self-checkout at the grocery store? I think I think we're definitely closer at least to kind of seeing the second coming of the Internet, those efficiencies kind of being captured and, you know, watching it kind of flow through to the actual consumer being those corporations for operational efficiency.
What do you do with commodities in 2026? Do you jump into the party? Is there a little bit of FOMO?
Do you take a step back, take some money off the table?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- us stock futures
- equity outlook
- tech megacaps
- silver volatility
- precious metals
Companies and tickers mentioned
- UBS
- UBS
Watch the episode
Watch “Tech Drags US Stocks as Silver Turns Volatile” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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