It’s not looking good for stocks right now. The major equity benchmarks were under pressure Thursday after Alphabet reported third-quarter results that missed analyst expectations. The report drove down the Google and YouTube owner by 9% in early trading, with investors and analysts worried about Alphabet’s future as artificial intelligence becomes more prevalent. Caterpillar, another AI-adjacent name thanks to investment in data centers, also tumbled 9% after revenue in its construction industries business came in slightly below estimates. Concerns around the sustainability of the AI trade have led to increased market volatility. The Cboe Volatility Index (VIX) hit a high of 22.31 earlier this month — a level not seen since June. Yet Citigroup strategist Scott Chronert remains undeterred in his bullish outlook. In a note late Wednesday, he reiterated his 8,100 year-end S & P 500 target. That’s 4.6% above Wednesday’s close. “All in, we continue to see a path higher for the S & P 500 into year end,” he said. And while Chronert noted that his 2026 forecast seems “aggressive at this point,” it is “still possible” for the benchmark to scale new heights despite hurdles such as increased debt issuance from AI companies. “Issuance has both a positive and negative spin to it, but we see room for positive follow through into year end. Namely, the past few days’ price action suggests a positive response to both successful issuance as it provides confidence in semi fundies as well as to modest moderation in capex commentary which may be interpreted as taking some pressure off of issuance,” he said. Still, a potential Federal Reserve rate hike in December complicates the path higher for stocks. Yet, Luis Alvarado, Wells Fargo Investment Institute co-head of global fixed income, thinks the economy is strong enough to handle tighter monetary policy. “We continue to expect the U.S. economy to prove resilient through 2027 even as growth slows. Consumer spending has remained buoyant while adequate market liquidity and supportive bank lending conditions should provide support. Corporate earnings have been strong, and businesses continue to invest in AI, infrastructure, and other productivity-enhancing technologies,” he said.
