by Denise Chisholm, Director of Quantitative Market Strategy, Fidelity Investments
Much has already been written about capital spending, but it’s worth lingering here a bit longer - if only to look at it from a slightly different angle. Rather than focusing on company‑level disclosures or the now‑familiar technology capex narrative, consider capital spending from an economic vantage point: manufacturers’ durable goods orders. It’s a narrower slice of the economy - firms that actually make things - and the data can be lumpy, which is why economists often focus on “core” durable goods, stripping out volatile defense and aircraft orders. Still, when manufacturers are stepping up orders for long‑lived equipment, it’s one of the cleanest real‑time signals we have of a capital spending rebound. And that is exactly what the data are showing today.
The recent acceleration has pushed year‑over‑year growth into the top quintile of its historical range. If your instinct is that more spending on equipment should pressure profits or slow hiring, history consistently argues the opposite. Periods of stronger capital investment have been associated with more hiring over the subsequent year and more durable earnings growth. It turns out capital spending is not just a reflection of growth - companies tend to invest when they have the cash - but a creator of it as well. Holding “all else equal” is harder than it sounds, and this is a good example of why.
That brings us to the next issue: diffusion. With the headlines dominated by AI and hyperscaler investment, it would be reasonable to assume this rebound is purely a technology story. But the data push back on that narrative as well. Of the seven major categories within durable goods orders, only two are directly technology‑related - and six are currently accelerating. The lone laggard is transportation, a category that is famously volatile. In other words, this capital spending rebound extends well beyond tech alone. That breadth matters.
Earnings growth is far more likely to be sustained when spending revives across industries, not just within a narrow slice of the market. Recall that median earnings growth for the S&P 500 has only recently emerged from nearly three years of contraction. The early signs suggest that this inflection is real - and increasingly durable. And when earnings growth broadens and persists, it continues to provide fundamental support for the secular bull market. The headlines may focus on where capex started, but the more important story is where it’s spreading.
This information is provided for educational purposes only and is not a recommendation or an offer or solicitation to buy or sell any security or for any investment advisory service. The views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Opinions discussed are those of the individual contributor, are subject to change, and do not necessarily represent the views of Fidelity. Fidelity does not assume any duty to update any of the information.
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