Investing.com -- BCA Research chief economist Peter Berezin believes equities could still grind higher into year-end, but warned that the setup beyond that looks poor given how much good news is already priced in.

"Wall Street analysts expect record-high earnings growth on top of record-high profit margins," Berezin wrote, adding that "While stocks could rise into year-end, the longer-term outlook for equities is unfavorable."

Central to his caution is the scale of AI-related spending. BCA Research estimates that AI companies may need to generate $10 trillion a year in revenue to justify the capital being deployed into data centers, roughly equivalent to annual global spending on food or healthcare.

For now, the firm said acute hardware shortages are supporting the trade. As a result, while BCA sees risks to stocks tilted to the downside over a 12-month horizon, it argued it is too early to tactically position for a bear market.

Berezin said he would turn structurally more bullish if productivity growth accelerated, but noted U.S. productivity growth in the second quarter came in close to its 10-year average, offering little evidence of that shift.

On rates, BCA stated that Kevin Warsh's unwillingness to discuss the Fed's reaction function has increased uncertainty and lifted bond yields, with yields unlikely to fall much against a tightening labor market.

The firm also flagged that falling oil prices partly reflect rising crack spreads curbing crude demand, which is “not a particularly encouraging sign for the global economy,” wrote Berezin.