Overview
UBS is maintaining an "Attractive" rating on U.S. equities, arguing that the main forces behind the market advance have not been broken. Strategists led by David Lefkowitz wrote that although the conflict in the Middle East persists, "signs of de-escalation should prevent stocks from experiencing a material pullback." They pointed to three macro and market-level pillars that they believe keep the bull case intact: healthy profit growth, a supportive Federal Reserve stance, and ongoing adoption of AI.
Earnings and market leadership
The bank’s 2026 price target for the S&P 500 stands at 7,500. UBS projects 17% earnings growth for the index, which it says would be the fastest pace in four years. The strategists expect technology and AI-related capital expenditure segments to continue accounting for a significant share of that expansion. Specifically, the Magnificent 7 plus Micron and Broadcom are forecast to drive roughly two-thirds of the total earnings growth.
UBS also emphasized that the remaining 491 stocks in the index have been contributing to growth, and the bank expects that broadening of participation to persist into the current quarter. For its full-year 2026 earnings-per-share estimate, UBS has set $310, implying 11% growth for the year.
Macro backdrop and company guidance
On the economic front, UBS highlights resilient consumer spending, a still-stable labor market and an ISM Manufacturing index that has re-entered expansionary territory after more than three years in contraction. The strategists said they expect company guidance to be better than feared, noting that this aligns with messages from companies that have already reported and with anecdotal comments from management teams that suggest "no material change in trends due to the war in the Middle East."
Energy flows and geopolitical assumptions
In its base case, UBS assumes traffic through the Strait of Hormuz resumes gradually but does not return to pre-crisis levels until the second half of the year. The bank said it is watching risks that could derail the bull market, including a prolonged disruption of oil flows from the Middle East or setbacks to AI adoption or monetization.
Volatility as a market signal
Strategists pointed to elevated volatility as a potential tailwind for equities. At the end of March the VIX closed above 31, a reading higher than 93% of historical observations. UBS noted that when volatility has been at similar levels in the past, forward returns tended to be better than normal. The team said that if the conflict continues to de-escalate and energy flows resume, they expect investor engagement to pick up and to help push the S&P 500 toward UBS’s 7,500 year-end target.
What UBS is monitoring
The bank flagged several key threats to its constructive base case: a sustained disruption of oil supplies from the Middle East and any meaningful setbacks to the adoption or monetization of AI. UBS said it is closely tracking these variables given their potential to alter earnings trajectories and market sentiment.
Note: All figures, forecasts and direct quotations in this report are drawn from UBS strategists as presented above.