Earnings Carry the Market: Fundamentals Still Lead

Nuveen’s latest CIO Weekly argues that despite geopolitical tension and inflation noise, equity markets remain anchored in earnings growth rather than sentiment or valuation expansion. 

• Q1 earnings are delivering double-digit EPS growth, led by technology, reinforcing that fundamentals—not optimism—are driving the rally.
• The Fed remains on hold amid sticky inflation (PCE at 3.5%), with internal divisions highlighting growing policy uncertainty.
• AI capex remains a dominant force, with hyperscalers spending $131bn in Q1 and expected growth of 30–60% YoY.
• Non-U.S. equities are gaining appeal, trading closer to historical valuations while the U.S. sits at a premium (~20.9x forward P/E).

If markets are no longer expanding on multiple expansion, can earnings alone sustain the advance? The note suggests they will have to.