Andrew Marchese, CIO at Fidelity Canada, told advisors at the firm's FOCUS2026 conference that the S&P 500's earnings yield now sits almost level with the 10-year Treasury yield.
Investors were long taught to expect stocks to pay several points more than bonds for their risk. Andrew said that cushion has disappeared, and he does not expect it to return to historical norms.
"When I was in business school, we used to talk about equity risk premiums at 6%... that's gone the way of the dodo bird." — Andrew Marchese
Andrew sets the investment outlook as Fidelity Canada's chief investment officer, and this talk was that outlook, delivered to the advisors who put client money into the firm's funds.
The full episode is covered here so you can skip it. 43 minutes of audio, 8 minutes of reading.
Here are the 9 calls that matter.
FidelityConnects · Oct 24, 2026 · recorded Oct 6, 2026 · 43m · 35m saved
With Andrew Marchese, CIO at Fidelity Canada
Key Takeaways
S&P 500 earnings growth forecasts for 2026 rose from 12–14% to over 30%, led by AI-linked companies
About 44 AI-linked stocks have combined earnings growth of about 41%
The equity risk premium is close to zero, a gap that went negative only in the dot-com bubble
About 100bps of further rate hikes priced into the US and Canada looks too aggressive
Andrew sees a greater chance the next 100bps in bond yields is lower
Pandemic liquidity was four to five times the financial crisis's and was never withdrawn, which pushes money into risk assets
A balanced portfolio is now 60/20/20, with gold preferred over Bitcoin as the hard asset
Most of 1999's internet builders are gone or diminished, and AI's long-run gains may go to its users rather than its chipmakers
Fundamental investing drives less than 50% of daily market decisions, so reacting is a losing exercise
1. Earnings Forecasts Top 30%
Andrew said the economy has played out as he expected this year. North American PMIs are in expansionary territory, and employment and other macro indicators are stable.
S&P 500 earnings forecasts for 2026 have more than doubled since January
"Bloomberg forecasts were basically for about 12 to 14% earnings growth in the S&P 500. That number is now over 30% as we look forward to year-end." — Andrew Marchese
Forecasts for 2027 sit at about 12–13%. The market has had to clear a bar that kept rising through the year, and earnings have kept clearing it.
A small group of AI-linked companies accounts for most of that revision
"About 44 companies that I would say are either strongly or loosely correlated with AI... combined earnings growth has been about 41%." — Andrew Marchese
Strength has also shown up outside technology, in transportation, capital goods and parts of consumer and financial stocks. Andrew treated the AI group as the main driver, not the only one.
