Schulze highlighted the broad scope of capex investments, pointing out that AI-driven expenditure in data centres necessitates substantial investments in power, cooling, networking, semiconductor, and software infrastructure. This sector alone now accounts for approximately 1% of the US GDP. "Capex is not just limited to AI, however, with several other metrics showing green shoots," Schulze explained. "These include the ISM Manufacturing PMI survey, which has held above 50 in each of the past five months, along with inflections in industrial production and core capital goods (non-defence, ex-aircraft) orders and shipments."

The positive trends in capex are further bolstered by corporate tax incentives from the One Big Beautiful Bill (OBBB), according to Schulze. This legislative measure appears to be providing a marginal boost, encouraging companies to increase their investments. "This pickup in capex is a positive sign and is likely being helped at the margin by the corporate tax incentives from the One Big Beautiful Bill," he noted.

As the US economy continues to demonstrate resilience, both consumers and companies are forging ahead, fostering optimism for continued market rallies. Schulze expressed confidence in the market's ability to sustain its upward trajectory. "With consumers and companies continuing to forge ahead, we remain optimistic that markets can continue to rally over the medium term," he stated. "Endemic to that view is the fact that the market’s upside over the past year has come on the back of improving fundamentals with multiples derating modestly."

The recent surge in the S&P 500 has sparked discussions among investors, with some expressing caution due to the market's strength. However, Schulze offered a historical perspective, suggesting that such rallies have often been precursors to continued economic expansion. "History shows that investors should not be scared off by the market’s recent strength, even though the S&P 500’s surge in April and May ranks among the top 10 strongest two-month stretches since 1950," he said. Schulze pointed to past instances where similar rallies occurred during periods of economic growth, citing years like 1997, 1998, 2019, and 2025 as examples.

"When focusing on non-recessionary periods specifically, history shows that stocks have continued to advance following similar surges, with average returns of 5.3% and 8.5% over the subsequent three and six months, respectively," Schulze added. This historical context provides a reassuring backdrop for investors considering the potential for continued market gains.

Despite the optimistic outlook, Schulze acknowledged the likelihood of market volatility. However, he emphasised that robust corporate earnings should provide a solid foundation for the market, encouraging investors to seize opportunities during any potential pullbacks. "Although bouts of volatility are likely, robust corporate earnings should continue to provide a solid market foundation, making us inclined to continue to 'buy the dips' should pullbacks emerge," he advised.

The insights from ClearBridge Investments underscore the importance of corporate capex in shaping the US economic landscape. As companies continue to invest in AI and other growth areas, the broader economy is expected to benefit, providing a strong footing for US equities. With historical precedents suggesting further market advances, investors may find opportunities in the current economic climate, supported by both corporate strategies and legislative incentives.