How AI, the Midterms, and Consumer Shifts Shape the Outlook

by Christine Short of Wall Street Horizon, 10/6/26

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Executives enter the earnings season with a bit of a swagger. They won't say it out loud, of course, but consider all the headwinds CEOs of companies big and small have faced in the last few years. First, it was imminent recession fears; then it was looming tariffs (followed by the shock of April 2025); then it was war in the Middle East & soaring energy prices; now firms grapple with multi-decade-high interest rates. Through it all, S&P 500 earnings estimates have trended up, and so have profit forecasts for smaller companies and international enterprises.

We'll soon find out if there's some give in the earnings-boom story once third-quarter reports trickle in and CY 2027 outlooks are presented. Leading into and through earnings season, investors must monitor updates, Q&A, and vibes at corporate conferences through the end of the year. It's a busy slate, and we certainly witnessed how price action takes its cue from the goings-on at industry events once folks returned from summer holiday last month.

AI: The Public Frenemy

The AI boom is no doubt front and center, as it should be. The tech confab slate is loaded, as you can see below. The current zeitgeist? Well, it's a juxtaposition. Consumer agentic AI products surge in popularity, while the public's "not in my backyard" data-center sentiment is louder than ever heading into the U.S. midterms.

See more: Do Oura and OpenAI IPO Delays Foreshadow a Slowdown in Dealmaking for Q4?

Management teams across sectors encounter AI-buildout backlash, and it requires CEO savviness and a new framing, lest the AI mega-trend be throttled domestically. Just recently, in an unprecedented gathering of the world's richest tech executives, the Trump administration pressed for U.S. leadership in AI. We'll be tuned into conferences ahead to see if capex plans match the bold ambitions signaled from the North Lawn of the White House.

Consumers Are Grinchy, But Poised to Spend

AI is the star of the show, but the consumer plays a key supporting role. We can take this either of two ways. Heading into the holiday shopping season (yes, it's already here!), household balance sheets are very strong, with aggregate household assets a record 10x liabilities. What's more, mid-year trends pointed to a pickup in lower-end wage growth, which helps to collapse the "k-shaped" economy. The jobs market might even be accelerating, while consumer spending is downright impressive.

Conversely, gas prices are stuck well above $4 per gallon nationally (diesel has hit records), just as the going rate for a 30-year fixed mortgage wobbles around 7.5% (flirting with the highest in three years). Consumer sentiment is dreadful, despite the historically low Misery Index (which combines the unemployment rate and CPI rate).

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