Jeffrey Schulze
Corporate capex is supporting economic growth in the US, according to Jeff Schulze, head of economic and market strategy at ClearBridge Investments.
Artificial intelligence (AI) investment in data centers requires related power, cooling, networking, semiconductor and software infrastructure, which now accounts for ~1% of GDP.
“Capex is not just limited to AI, however, with several other metrics showing green shoots. These include the ISM Manufacturing PMI survey, which has held above 50 in each of the past five months, along with inflections in industrial production and core capital goods (non-defense, ex-aircraft) orders and shipments. This pickup in capex is a positive sign and is likely being helped at the margin by the corporate tax incentives from the One Big Beautiful Bill (OBBB).
“With consumers and companies continuing to forge ahead, we remain optimistic that markets can continue to rally over the medium term. Endemic to that view is the fact that the market’s upside over the past year has come on the back of improving fundamentals with multiples de-rating modestly. Put differently, equities have climbed higher on the back of stronger earnings, an encouraging foundation for a continuation of the bull market.
“History shows that investors should not be scared off by the market’s recent strength, even though the S&P 500’s surge in April and May ranks among the top 10 strongest two-month stretches since 1950. While several similarly sharp rallies have occurred around recessions, many others were rooted firmly within economic expansions, including 1997, 1998, 2019 and 2025.
“When focusing on non-recessionary periods specifically, history shows that stocks have continued to advance following similar surges, with average returns of 5.3% and 8.5% over the subsequent three and six months, respectively.
“Although bouts of volatility are likely, robust corporate earnings should continue to provide a solid market foundation, making us inclined to continue to “buy the dips” should pullbacks emerge.”