Strong first-quarter earnings growth in the U.S. is helping investors look past elevated valuations and ongoing geopolitical tensions tied to the conflict in Iran. While higher energy prices and the continued shutdown of the Strait of Hormuz are creating pressure across parts of the economy, enthusiasm around artificial intelligence-related spending continues to support U.S. equities.
BNN Bloomberg spoke with Julien Nono-Womdim, vice-president of equity analysis at Goodreid Investment Counsel, about why he believes earnings growth remains the key driver for stocks, where AI-related investment is creating opportunities across industrials and power infrastructure, and why he remains constructive on U.S. equities despite geopolitical uncertainty.
Key Takeaways
- First-quarter 2026 earnings growth for the S&P 500 rose 28 per cent, significantly ahead of analyst expectations.
- Julien Nono-Womdim said elevated valuations, rather than geopolitics, remain the bigger long-term risk for U.S. equities.
- AI-related capital spending continues to drive growth across technology, industrial and power infrastructure companies.
- Companies tied to data centre power efficiency and industrial automation could benefit from growing AI demand over the next several years.
- Higher fuel prices linked to the Iran conflict are affecting consumer-facing businesses, though broader earnings momentum remains strong.
Read the full transcript below:
LINDSAY: In the latest news on the conflict in Iran, U.S. Secretary of State Marco Rubio says there has been slight progress in talks with Iran. Whether these talks turn into a tangible peace deal soon remains to be seen, but our next guest says he remains constructive on American equities despite geopolitical risks and the continued shutdown of the Strait of Hormuz. Joining us now is Julien Nono-Womdim, vice-president of equity analysis at Goodreid Investment Counsel. It’s great to have you join us. Good morning.
JULIEN: Good morning, Lindsay.
LINDSAY: So, you’re still feeling pretty optimistic. What do you see as the greatest risk to U.S. equities as a result of the conflict?
JULIEN: Well, I think the conflict is certainly something that’s topical, but we need to step back and think about what drives equity markets, and that’s earnings growth in conjunction with valuations. Let’s say right now the risk to equity markets has less to do with geopolitics and more to do with the tension between earnings growth and where valuations are today. As we’ve seen from companies in Q1 reporting, earnings growth shattered expectations, up, call it, 28 per cent year over year, but at the same time, valuations on the S&P 500 are elevated relative to historical measures at 21 times earnings or so. So I think the valuation tension relative to the earnings growth is the biggest risk. However, because the earnings growth has been exceptional, and because the outlook continues to be pretty strong on that front, we remain constructive at Goodreid.
LINDSAY: I mean, I do take your point, but we’re seeing some companies like Walmart, for example, reporting earnings, and their earnings have already been affected by higher fuel costs, which are obviously a result of the conflict in Iran. Right? So they are all connected. So do you expect, as you say, the S&P 500 up by 28 per cent in the first quarter of this year, given that and the connection that there is with the conflict, do you expect that momentum to continue?
JULIEN: Yeah, and I think that the Walmart example is very pertinent, and this is where we have to disaggregate the S&P 500, individual companies and the economy. You take a company like Walmart, they’re certainly tied to the consumer economy, and that’s why they are seeing the effect that we’re seeing as consumers. Higher gas prices, whether it’s here or abroad, is certainly having an impact, and that will consequently affect the likes of Walmart. But if you step back and you look at the S&P 500 and its largest constituents, which are predominantly technology companies, communication services companies and, to an increasing extent, industrial companies that are benefiting from a generational investment cycle in AI-related products, there the earnings growth has been strong, and we expect it to continue to be strong. So I would caution viewers to sort of look at the market and the economy as related, but not necessarily overlapping.
LINDSAY: Okay, so let’s talk about that a little further. The AI growth and the spending that we’ve seen that’s been driven largely by AI spending. What is the market rewarding the most at the moment then? Is it growth, margins, cost discipline? What do you think it is?
JULIEN: Well, I think it’s a combination of two things. It’s certainly growth. That would be number one, it’s growth, and then the second is, with that growth, the expectation of higher margins, which translates into above-revenue growth, earnings growth — a bit of a full word there — but earnings growth is ultimately what drives stocks. And where we think the areas of opportunity are is starting to think in the second- and third-order effects, not the immediate spenders, but companies that are going to benefit from that spending. We’ve seen it in areas like power, we’ve seen it in areas like memory, and we’ve also seen it in an area that we like particularly, which is the industrial sector broadly speaking. So companies that are going to be recipients of AI-fuelled demand, as a result of that, they likely have a pricing tailwind, which will then lead to strong earnings growth.
LINDSAY: And when it comes to the areas of the AI boom that you see the most opportunity in, what are they? Is that power, networking, memory? What areas?
JULIEN: For us, it’s a combination of power, it’s a combination of just broad industrials. We’ve found the industrial sector as a whole to be an incredible source of opportunity, not just this year, but last year as well, and even the year before.
LINDSAY: Okay, we’ve got some stock picks that we want to go through that you like right now. We’ll start with the first one, Regal Rexnord Corp. Tell us more about this one and what opportunities you see.
JULIEN: Yeah, so Regal Rexnord, it’s a diversified industrial company. They effectively create systems and subsystems that do one thing really, really well, which is convert, transmit or apply power quite well. What I mean by that, if you’re at an airport, the conveyor belt, the power system that makes that conveyor belt move would be something that could be powered by a Regal Rexnord system. Now, the applications are diversified across the economy, but they have an emerging data centre business, which is pretty small today, but we think it can increase substantially over the years ahead. The company is also tied to broad industrial activity, and we think that broad industrial activity, based on our channel checks, is improving materially, and lastly, the earnings growth relative to the valuation we think is very attractive.
LINDSAY: Okay, next one is SolarEdge Technologies. What is it that you like there?
JULIEN: Well, SolarEdge, it’s a company we’ve followed for a very long time, and I think going back to your earlier question about, well, what does the Strait of Hormuz mean for energy markets? What does it mean for the broader economy? This is a stock where there’s multiple ways of winning in terms of the thesis playing out. The first one is the base business. They do residential and commercial solar, and they create inverters, so if you think about a world where power is going to be constrained because of the energy shock, this is a company that should benefit, and we’ve seen a stabilization in their base solar business, which is good. But the more interesting and exciting part for us is that because power efficiency is a critical component of data centres, they’ve partnered with a number of semiconductor companies, Infineon being one of them, to create transformers, solid-state transformers, which effectively allow data centres to transmit power in a more efficient way. So this is a brand new end market opening up for the company, and based on our numbers, looking out to 2028, when the next generation of chips, which need these higher-voltage transformers, are going to be available, SolarEdge stands to benefit.
LINDSAY: Lastly, Amazon is another company that you see some opportunity in right now. Tell us more.
JULIEN: Yeah, absolutely. In terms of Amazon, there are really two parts to the business. The first is the retail business, and now we’re very excited because the margins looking out multiple years have sort of always been understated by the company and underestimated by the Street. We think that on a multi-year basis, the retail margins are going to continue to expand, and it’s not something that came to us randomly. We look across our portfolio companies, and then we say, well, what products does this company offer that might benefit another one of our portfolio companies? So going back to Regal Rexnord, one of their key end markets is they have a potential growth driver in humanoid robots, and we think that could be something that could benefit the likes of Amazon. If you think about factory automation, that’s something where we think there’s continued runway for Amazon’s retail segment, which should drive higher margins. And on the AWS side, if we go back five years or so, we were talking about on-prem versus cloud computing, and the question was, well, when is cloud demand going to slow down meaningfully? In an AI world, that conversion from on-prem to cloud is only accelerating. We’re seeing it in the numbers, and we’re very excited about Amazon from a portfolio holding perspective.
LINDSAY: All right, we’re going to have to leave it there. Julien Nono-Womdim, vice-president of equity analysis at Goodreid Investment Counsel. Great to have you join us. Thanks so much.
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This BNN Bloomberg summary and transcript of the May 22, 2026 interview with Julien Nono-Womdim are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
