The real driver of U.S. markets right now isn’t interest rates. It’s earnings. And especially, AI. Here’s what you need to know – and what to do next. You’ve probably heard: the U.S. Federal Reserve (Fed) just held interest rates steady for the seventh straight month. That’s despite the South African Reserve Bank moving in the opposite direction with another rate cut. Fed Chair Jerome Powell made it clear that rate cuts in the U.S. aren’t coming anytime soon – especially with ongoing tariff uncertainties from the White House muddying the inflation outlook.
What does that mean for you as an investor?
Short-term, it means you shouldn’t expect much help from interest rates to push markets higher. In fact, after Powell’s remarks, expectations for a September cut fell sharply — from 70% to below 50%. Forecasts for 2025 rate cuts dropped too.
That sounds like bad news, right?
Actually, not at all.
If It’s Not the Fed… Then What’s Driving the Market?
The answer is earnings.
We’re just over halfway through the latest U.S. earnings season — and so far, it’s delivering real results.
80% of S&P 500 companies reporting so far have beaten expectations.
That’s a strong showing. And with 162 more companies set to report this week, momentum is building.
Here’s the bigger picture:
* S&P 500 companies are showing 6.4% year-over-year profit growth
* The average “beat rate” (by how much results exceed forecasts) is 6.1%
(That’s below the 5-year average of 9.1%, but still solid.)
So yes, growth is slowing slightly — but it’s still growth. And in this market, that matters.
The Biggest Winners? Tech and AI
This earnings season has made one thing crystal clear: the AI boom is still in full swing. And it’s profitable.
Just look at these standouts:
Alphabet (Google)
Crushed earnings. Revealed a $106 billion cloud backlog, largely AI-driven. Upping its 2025 capex by $10 billion — now planning to spend $85 billion on AI infrastructure next year.
Meta and Microsoft
Both blew past expectations.
* Meta is using AI to drive content engagement and ad revenue
* Microsoft’s Copilot is transforming enterprise productivity and driving subscription growth
Vertiv
A lesser-known AI infrastructure play.
Just posted 35% revenue growth and expects another 20% boost in the second half of 2025.
It’s already in the *South African Investor* portfolio, and I believe it’s heading toward \$200 per share — a potential 38% gain by year-end 2025.
What You Should Do Next
If you’re waiting on interest rates to push markets higher, you might be waiting too long. Instead, focus on what’s working right now:
Follow the money — and it’s flowing into AI and earnings-growth stocks.
Here’s what you can do:
* Reassess your exposure to AI-related sectors like Communications and Technology
* Look beyond the Magnificent 7 — infrastructure plays like Vertiv are quietly soaring
* Stay invested during earnings season — and watch for companies delivering real growth
The next 12 to 24 months are shaping up to be defined by relentless innovation, massive AI spending, and explosive earnings growth from the tech ecosystem.
Don’t sit on the sidelines waiting for a Fed pivot. The opportunities are already here — and they’re coming from earnings and AI, not interest rates. Follow South African Investor for the best AI opportunities.
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