Setup for equities into year-end is pretty positive, says Wells Fargo's Ohsung Kwon

Group 1: Market Outlook - The stock market is expected to rally, with a target of 7100 by year-end, supported by a positive earnings season where 75% of companies beat EPS estimates, marking the broadest beat in four years [2][3] - Seasonality trends are anticipated to improve from November to December, potentially leading to a catch-up trade for lagging stocks [3] - The potential refund of tariffs if deemed illegal by the Supreme Court could enhance company margins, as companies may maintain higher prices while benefiting from reduced costs [3][4] Group 2: Economic Factors - Tax returns are projected to increase by $800 per person compared to the previous year, which could positively impact consumer spending [5] - The reopening of the government is seen as a potential positive catalyst for the equity market, as historical trends suggest it could remove overhangs for equities [6][7] Group 3: Risks and Concerns - The hyperscaler companies are facing challenges, particularly in the AI capital expenditure (capex) cycle, which is still in its early stages and may lead to reduced free cash flow [8][9] - The free cash flow conversion for these companies is expected to decline to 50%, down from 100%, indicating potential financial strain [9][10] - The multiplier effect of AI capex is considered smaller compared to traditional capex, suggesting that the economic benefits may not be as significant [11][12]