While AI-related themes continue to drive the US equity market, sector selection is becoming more important against the backdrop of rising long-term interest rates.
IT-related stocks, led by AI-related names, continued to support the market this month, and earnings outlooks toward 2027 remained on an improving trend. At times, however, rising long-term interest rates have been a headwind for technology stocks, although the strength of earnings growth is seen as outweighing this impact.
Improved earnings forecasts have spread across healthcare, and the outlook for EPS growth in 2027 improved significantly. Healthcare was noted to be continuing to outperform other sectors while maintaining its presence as a defensive sector.
The capital goods sector saw broader-based earnings improvement against the backdrop of an expanding manufacturing PMI, with expectations for 2027 earnings growth rising in construction, transportation, aerospace and defense.
September saw fund inflows into utilities and real estate, confirming a shift of funds toward defensive areas. At the same time, institutional investor positioning remained concentrated in the IT sector.