UBS reiterated its positive stance on U.S. equities, keeping an "Attractive" view as it outlined a path for further gains in the S&P 500 through 2026. In a note led by David Lefkowitz, the bank’s Chief Investment Officer and Head of U.S. Equities, UBS set targets of 7,300 for the S&P 500 by June and 7,700 by December 2026.
The firm said these milestones are underpinned by what it called "healthy profit growth, supportive Fed policy, and the adoption of AI." UBS forecasted S&P 500 earnings of $310 for 2026, which it described as representing 11 percent growth.
UBS argued the market's firm performance year-to-date reflects this supportive backdrop. The note emphasized three elements the bank sees as sustaining the bull market:
- Profit growth: Corporations are delivering earnings gains that UBS judges to be robust.
- Monetary policy: The bank expects the Federal Reserve to cut rates later this year, which it views as supportive for equities.
- AI adoption: UBS expects the deployment of artificial intelligence to create shareholder value and contribute to market upside.
On geopolitical risks, UBS framed its base case around a limited disruption to energy supplies stemming from the U.S.-Iran conflict. The bank expects oil prices to ease from elevated levels, a development it sees as clearing the way for equities to advance.
However, UBS cautioned that if energy does not resume flowing from the Persian Gulf in the coming weeks, investors should be prepared for potential downside in equity markets. The note also observed that historically the S&P 500 "typically rises after geopolitical events," a point UBS raised while outlining scenarios.
UBS pointed to market indicators that it interprets as signaling additional upside. When volatility spiked in March, the VIX closed above 29, a reading the bank said is "higher than 93 percent of all observations." UBS noted that historically the S&P 500 has delivered more than a 20 percent average return over the following year after comparable volatility spikes.
Reiterating its year-end 7,700 target, UBS continues to expect U.S. stocks to climb through the remainder of the year, conditioned on the macro and geopolitical assumptions laid out in its research note.
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