MS' Mike Wilson says a buying opportunity is coming but only after the S&P 500 "catches down" to the broader market weakness that has been happening for months under the surface. “We advise investors to be ready for either a very rapid reconciliation or a slower bleed into November because in our view, that will be the time to add risk rather than shun it,” Wilson said in a client note. Wilson continues to expect quality stocks (stronger profitability, balance sheets, earnings predictability) to lead as the market continues to move from an early-cycle recovery led by lower-quality stocks into “a more selective mid-cycle environment where earnings durability matters more.” The emergence of quality stocks as the market focus has been in motion since mid-August he says. The gap in earnings revision breadth between high- and low-quality has expanded to 10% Wilson noted, the second-widest since 2010. Historically, when this gap has been in the top quintile, it’s led to an average 7.5% outperformance over the following year for higher-quality stocks over their lower-quality brethren. Wilson also continues to think that that tightening financial conditions will obviate the need for the Federal Reserve to hike the federal-funds rate. Wilson says the tightening from rates, the dollar, and energy prices is the most since 2022. If, however, Warsh maintains his hawkish focus on inflation, rate-sensitive stocks may continue to underperform, Wilson said.

Hartnett (Flow Show) says while he's short term bearish on Tech, “we think macro and markets into ‘27 driven by AI; watch semiconductor prices... fresh price gains = bullish... AI spending arms race between US & China continues, as does US government guarantee bond/equity prices won’t be allowed to impede US (even with DEM [Democratic] sweep midterms)...investors...return to tech mid-Nov and enter ‘27 reversing ‘short tech bond’ positions;" but "a rollover in semi prices signals further tightening of AI credit, top in AI capex growth, and lower-than-expected nominal GDP growth in ‘27; asset returns next year then driven by income rather than by capital appreciation.”

Citadel's Rubner: We remain constructive on US equities into Q4, but the next several weeks will be a much more meaningful test of the fundamental backdrop. In our last note, October: The Q4 Reload, we focused on the reset in valuations and positioning, and the potential return of several of the market’s largest buyers. Since then, Earnings: Expectations remain exceptionally strong, with forward earnings estimates rising even as valuations have compressed. Nearly half of the S&P 500 will report in five sessions, while corporate buyback windows begin reopening against a record year of authorizations. Rotation: Equal weight has begun to recover from historically depressed relative levels, with improving participation across defensives, cyclicals and rate-sensitive sectors. The recovery in market breadth is an encouraging development after months of narrow leadership. Retail: Buying has accelerated sharply, driven by stronger directional conviction rather than higher volumes. Demand remains concentrated in index ETFs, Semiconductors and AI infrastructure, alongside record-paced buying of fixed-income ETFs. Volatility: Single-stock volatility continues to outperform the index as correlations remain near historical lows. Earnings could reinforce that divergence, while low index implied volatility offers relatively attractive protection against a shift toward correlated selling. After months dominated by macro headlines, positioning adjustments, and shifting AI narratives, earnings are returning to the center of the conversation. And with valuations reset, investor demand beginning to recover, and market leadership showing early signs of change, the setup heading into this reporting season looks considerably different than it did just a few months ago. Our constructive Q4 view remains intact, with several of the dynamics highlighted in our last note beginning to materialize. We continue to favor selective single-stock exposure over simply adding index beta. The recent improvement in participation is promising, but the next several weeks will provide a much more meaningful test of whether it can persist.