Cantor Fitzgerald's recent presentation suggests a prime setup for stocks to rally higher after recent investor pullbacks from AI worries.
In their February 23, 2026 bi-weekly note, they point to spikes in put buying, fear gauges, and falling optimism as classic contrarian buy signals amid strong fundamentals like earnings beats and buybacks. Eric Johnston of Cantor said, "This provides a very good set up for the next leg of the rally considering the fundamental back drop is quite strong."
Cantor crunched data back to 1955 and found that in every one of 21 years with GDP growth over 2.25% and no Fed rate hikes, the S&P 500 climbed, with an average return of 19.6%.
They expect this "extremely high" likelihood in 2026 from AI spending booms (Mag7 capex jumping to $650B from $382B), onshoring, tax cuts adding 90 bps to GDP, and Fed easing, according to Johnston.
Cantor loves mega-cap tech and software stocks now, hit by cash flow fears and AI disruption but trading at oversold levels, like the Nasdaq's PEG ratio at a 10-year low and Mag7 outperforming S&P 500 at a cheap RSI of 23.75. They're also sticking with bonds as inflation cools via falling wages, housing costs, and lapped tariffs, calling them a smart hedge, the strategists noted.
Broader positives include S&P 500 earnings forecasts rising to $320/share, equal-weight profit margins expanding via AI, a shrinking budget deficit (to 5.2% of GDP in 2025), weak job growth outside healthcare, and upbeat consumer sales. Johnston's team stays "bullish Bitcoin" too, post recent de-risking, with easy money and liquidity tailwinds ahead.
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