Cantor Fitzgerald's Eric Johnston: Rally remains strong with sales growth and margins rising

Market Outlook - The market has shown strength during the traditionally weak period from June to October, with historical data indicating that it has been strong 100% of the time in November and December since 1950 [3] - Earnings power for the S&P 500 is accelerating, with sales growth tracking at approximately 8% this quarter, which is notable given the absence of a recession [4] - The "Magnificent Seven" companies have maintained stable headcount while experiencing revenue acceleration, leading to significant margin growth and mid-teens earnings growth [5] Labor Market and Corporate Margins - There has been a shift in corporate attitudes towards layoffs, with companies becoming more comfortable with the idea, which may positively impact margins [6] - The trend of labor hoarding is diminishing as companies recognize the benefits of AI, allowing for improved margins despite potential negative impacts on labor [7][8] Federal Reserve and Monetary Policy - The likelihood of a rate cut in December is perceived to be lower than market expectations, which could lead to negative market reactions if it does not occur [9][10] - The upcoming change in the Federal Reserve regime in May 2026 may lead to lower interest rates and potential quantitative easing, which could create favorable conditions for corporate America [11] Inflation and Consumer Spending - Inflation has remained above 2% for five years, and the Fed's current stance suggests a shift towards a 2.5% to 3% inflation zone, which is seen as positive for risk assets [12][13] - The correlation between consumer spending and restaurant performance is declining, indicating that the S&P 500 is increasingly driven by the AI data center buildout trade rather than consumer behavior [17]