UBS strategists have reiterated their positive S&P 500 forecast, maintaining their target of 6,200 by June 2025. The investment bank highlighted strong gains driven by AI-related stocks and quality companies as key factors supporting this bullish outlook. Despite potential short-term volatility, UBS remains confident in corporate earnings growth and stable U.S. economic conditions.
Strong Market Performance Amid Earnings Season
The S&P 500 entered the third-quarter earnings season on a high note, reaching its 45th all-time high of 2024. With the index now up by nearly 22% for the year, the UBS S&P 500 forecast remains optimistic, even as investors brace for potential fluctuations due to upcoming earnings reports and global risks.
UBS warned that the next few weeks may bring some volatility as companies release their financial results and forward guidance. Adding to this is the uncertainty surrounding the U.S. election and rising geopolitical tensions in the Middle East. However, UBS’s long-term S&P 500 forecast stays unchanged, as they expect earnings growth to stay strong, particularly among companies benefiting from artificial intelligence advancements.
UBS S&P 500 Earnings Outlook
UBS expects S&P 500 earnings per share (EPS) growth to range between 5% and 7% in the third quarter. This marks a slowdown from the 11% growth seen in the second quarter, primarily driven by lower oil and gas prices. However, UBS has kept its full-year 2024 EPS growth forecast at 11%, with broader profit growth across various sectors expected to maintain momentum.
The S&P 500 forecast from UBS highlights that corporate profit growth remains robust, not only for large-cap tech companies but across other industries as well. UBS expects continued earnings contributions from AI-driven firms, which should support the index’s performance through 2025.
Favorable U.S. Economic Conditions
UBS strategists have also factored in the favorable U.S. macroeconomic environment into their S&P 500 forecast. The U.S. economy remains stable, with low unemployment rates, healthy job market conditions, and minimal signs of distress in key sectors like construction and manufacturing. These indicators reinforce the bank’s projection for sustained growth through 2025.
Moreover, UBS believes that recent interest rate cuts by the Federal Reserve will help boost the economy. With lower interest rates, consumer finances and business lending conditions are expected to improve, providing additional support for U.S. economic activity. These factors play a crucial role in UBS’s long-term S&P 500 forecast.
AI and Tech Stocks Continue to Lead
AI technology remains a driving force behind the UBS S&P 500 forecast, especially among the “Magnificent 7” tech giants. UBS forecasts continued robust earnings growth for these companies, expecting a 20% year-over-year increase. This growth is being fueled by ongoing investments and breakthroughs in artificial intelligence.
UBS also pointed out that management guidance during earnings season will have a significant impact on stock prices. The S&P 500 forecast expects no major disappointments in earnings guidance, further supporting the view that profit growth will continue through the rest of 2024 and into 2025.
Long-Term S&P 500 Forecast Remains Strong
Despite potential short-term volatility, UBS strategists maintain their long-term S&P 500 forecast at 6,200 by June 2025. They believe that stock valuations, while high, are reasonable given the strong macroeconomic conditions and positive earnings outlook.
Key Takeaways
- UBS maintains an S&P 500 forecast of 6,200 by June 2025, driven by AI and tech stocks.
- U.S. economic conditions remain favorable, with low unemployment and steady sector growth.
- The Federal Reserve’s rate cuts are expected to boost economic activity, supporting further stock market gains.
- AI-driven companies continue to lead the way, with projected earnings growth of 20% year-over-year.
With strong corporate profits and a resilient U.S. economy, UBS’s long-term S&P 500 forecast remains positive, expecting the index to hit 6,200 by mid-2025.
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