Monthly Investment Insights - SEPTEMBER 2026 - Topics US 2Q Earnings Season - Broadening Earnings Strength - Align Chinese Exposure to Beijing’s Priorities

Oct 22, 2026

Uploaded by Kyle

Monthly Investment Insights covers two investment themes for September 2026: broadening earnings strength in the US during the 2Q 2026 earnings season and aligning Chinese onshore exposure with Beijing’s priorities. It highlights record-beating profit expectations, robust margin levels, and a shift in earnings growth contributions from AI hyperscalers toward semiconductors. It also explains China’s onshore opportunities amid valuation reset, reinforced policy tailwinds, and a selective approach combining high-quality growth with dividend-focused equities.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages4

Reading Time10 min

AccessFree to download

TOPIC 1: US 2Q Earnings Season - Broadening Earnings Strength

What you can do

Key points

TOPIC 2: Align Chinese Exposure to Beijing’s Priorities

What you can do

Key points

In collaboration with: Monthly Investment Insights SEPTEMBER 2026 TOPIC 1: US 2Q Earnings Season-Broadening Earnings Strength United States (US) companies continue to post strong profits, but leadership is expanding beyond hyperscalers, so investors should balance artificial intelligence (AI) opportunities with stable, defensive investments. |

What you can do
Broaden portfolio exposure without sacrificing quality growth opportunities. Take advantage of market
pullbacks to selectively add quality assets while diversifying across AI beneficiaries, financials and healthcare. | | | --- | --- | | → The 2Q 2026 US earnings season was one of the strongest on record, with 88% of S&P 500 companies beating profit expectations, above the long-term average of 73% . Based on current trajectory, earnings are on track to grow 41% year-on-year (y/y), putting 2026 on course to be one of the strongest profit growth years in decades. Profit margins also remain near record highs, reflecting strong business fundamentals and efficient cost management.
→ The composition of earnings growth are however beginning to shift. Technology companies are still leading in earnings growth, but AI hyperscalers are contributing less to overall earnings growth, falling from 41% in 2024 to 21% in 2025 and just 8% in 2Q 2026.
→ This is because hyperscalers are investing heavily in AI infrastructure, which is reducing short-term profit growth. Instead, more of the benefits are flowing to semiconductor companies that supply the chips needed for AI development, which are emerging as some of the biggest beneficiaries of the AI investment cycle. | → While AI and semiconductor stocks saw a sharp correction in July, the pullback appears to have been driven more by investor positioning and profit-taking rather than weakening fundamentals. The long-term outlook remains constructive, with the AI accelerator market expected to grow rapidly, potentially reaching USD1 .4 trillion by 2030.
→ For investors, the key takeaway is to broaden exposure without abandoning quality growth. While AI remains a powerful long-term theme, earnings momentum is broadening into sectors such as financials and healthcare. This could help the two sectors narrow their year-to-date underperformance (Figure 1) .
→ Adopt a barbell approach by using market pullbacks to gradually accumulate high-quality AI beneficiaries atmore attractive valuations, while gaining exposure to financials for their structural tailwinds and healthcare for their defensive characteristics. | | Figure 1:
Year-to-date price performance for select sectors
Indexed to 100 on 1/1/2026
| | 80 Jan ‘26 Feb ‘26 Mar ‘26 S&P 500 Apr ‘26 May ‘26 Jun ‘26 Jul ‘26 Aug ‘26 Information Technology Health Care Financials Source: FactSet, Standard & Poor’s, J. P. Morgan Asset Management. Speak to your UOB Advisor today to find out more. TOPIC 2: Align Chinese Exposure to Beijing’s Priorities China’s onshore equity market may offer selective opportunities following its recent underperformance, with growth leaders tied to China’s strategic priorities. What you can do Despite recent underperformance, comparatively attractive valuations and resilient earnings create selective opportunities in quality growth companies aligned with China’s strategic priorities and quality dividend-paying stocks. → Despite near-term uncertainty, the structural tailwinds supporting China’s onshore equity market remain intact. The July Politburo meeting reinforced Beijing’s focus on industrial upgrading, technological self-reliance and advanced manufacturing, with policy support tilted towards AI infrastructure, high-tech manufacturing, energy security and broader self-reliance initiatives. This suggests that some of China’s most important longterm growth themes may be better captured through the domestic onshore market, where policy priorities are more directly reflected in listed companies tied

FAQs

Why does the US earnings outlook suggest broadening strength in 2Q 2026?

The document notes that 2Q 2026 was one of the strongest earnings seasons on record, with 88% of S&P 500 companies beating profit expectations and earnings tracking for strong year-on-year growth. It also emphasizes that earnings growth leadership is expanding beyond hyperscalers.

What explains the shift in US earnings growth contribution away from AI hyperscalers?

Hyperscalers are investing heavily in AI infrastructure, which reduces short-term profit growth. As a result, benefits are described as flowing more to semiconductor companies supplying chips for AI development.

How should investors align Chinese exposure with Beijing’s priorities according to the document?

It recommends a selective approach focused on high-quality growth tied to policy priorities such as industrial upgrading, technological self-reliance, advanced manufacturing, AI infrastructure, semiconductors, and energy security, while also considering quality dividend-paying stocks for income.

Oct 22, 2026

Uploaded by Kyle