S&P 500 Relative Value Cheat Sheet: Capex-takers vs. spenders thesis played out. Raising Comm Svcs to marketweight

We nudged up our year-end S&P 500 target to 7400 this week and launched a 12m target of 7800, modest returns from here. Multiples have compressed for a good reason - higher earnings. But current multiples imply much lower inflation than we are likely to achieve in the near term, and we see elevated sell-off risk into year end. We upgrade Communication Services to marketweight from underweight on better macro and micro: valuations have become more attractive, alongside productivity gains and improving visibility into AI monetization (Google & Meta are 78% of the sector weight). The tech thesis played out - AI capex takers beat spenders. Our core thesis on Comm Svcs has largely played out: we downgraded it to uw and raised Info Tech to mw in mid-2025 on risks around increasing capital intensity, leverage and opacity of the hyperscalers vs. sales growth potential in chips and hardware;