The current earnings season in the United States is one of the strongest in years. Companies are delivering positive surprises, while the equity market is behaving as if it were largely ignoring the risks that are still present in the background. So how could a market downturn unfold?
All of this — the entire rally — is taking place in an environment that can hardly be described as calm. The conflict in the Persian Gulf region has continued since late February, geopolitical tensions have not disappeared, and yet investor sentiment remains exceptionally resilient.
“The market is behaving as if it were looking at Wall Street with only one eye, focusing only on corporate reports,” says Mikołaj Sobierajski, equity market analyst at XTB, in an interview with MarketNews24. “The results are among the best in many years. Most of the companies that have reported so far have beaten market consensus very convincingly.”
Instead of a slowdown, the market has seen a continuation of the upward trend, which is increasingly spreading to other market segments. This is no longer just a story about a handful of the largest companies, but a broader move covering many sectors of the US economy.
There are also sectors that remain under pressure from costs, weaker demand or cyclical challenges and are not participating in the rally to the same extent as the leaders. However, they are not setting the tone for the overall market.
That role is being played mainly by technology companies and the broadly understood Big Tech segment. In practice, they are determining the direction of the entire market and accounting for a significant part of the gains in major indices. Their financial results are not only strong in themselves, but also act as a catalyst for the wider market ecosystem. This is particularly visible in rising capital expenditure, or capex, which is driving further links in the technology chain.
“On the back of these results, Wall Street is swelling, and investors believe in the resilience of US companies to the threat of recession, as if even a slowdown did not apply to them,” the XTB expert comments.
Artificial intelligence remains at the centre of attention. Demand for computing power, the expansion of data centres, and growing demand for semiconductors and memory all form one coherent investment cycle. This cycle reinforces itself. Higher investment by Big Tech companies fuels chipmakers, while their development in turn enables further expansion of AI.
As a result, the market is in a phase in which gains have a very strong narrative justification and, to some extent, a fundamental one as well. Indices, including the Nasdaq, regularly test new highs, while each new wave of earnings reports reinforces the belief that the trend remains intact.
However, one question is increasingly beginning to cut through this optimism: where is all this heading, and how long can indices continue to set new records? On the one hand, there are very strong results, dynamic investment and a real technological impulse connected with AI. On the other hand, the concentration of gains around a few of the largest companies is becoming more visible, naturally raising questions about the durability and breadth of the trend. This market structure means that the strength of indices depends largely on the continuation of a very specific investment narrative.
For now, however, the market is not looking for an answer to this question in a defensive way. Quite the opposite: the dominant approach remains “higher, higher, higher”, where each new earnings season and each additional AI investment becomes an argument for further growth. As long as this mechanism continues to work, it is difficult to identify a natural moment at which the narrative might reverse.
It is worth noting that the longer such a market phase lasts, the more the centre of gravity shifts from “do the fundamentals justify this?” to “how much longer can they justify this?” The market then starts to operate according to the logic of a self-reinforcing trend, where rising prices themselves strengthen the belief in its durability. This, in turn, attracts more capital from investors who do not want to miss the next wave of gains.
“Investor enthusiasm is still justified by fundamental analysis, and the bull market is the result of faith in the future of artificial intelligence spreading across all sectors,” explains Sobierajski from XTB. “The glue holding these gains together is the capital expenditure of the largest Big Tech companies. It is a self-reinforcing trend.”
Historically, phases of this kind of bull market often end not with one specific event, but with a gradual change in narrative. First comes a slowdown in the pace of earnings surprises, then more selective market reactions, and only at the end a broader questioning of valuations.
For now, however, the market is at a completely different point in the cycle, where each new report and each AI investment strengthens the belief that “this time is different”, while the market continues to find new arguments to support the upward move.
“I would not expect a bear market. Rather, we will be dealing with a slowdown, and then the next quarterly results, with weaker growth in profits and revenues, will become a very important test of investor resilience,” the XTB analyst concludes. “There will be no sudden crash, no abrupt correction, but positive emotions will cool — although not yet in 2026.”
