UBS, the Swiss financial services firm, expects U.S. stocks to rebound in the second half of the year and has raised its year-end forecast for the S&P 500 index. This outlook follows easing trade tensions between the U.S. and China, as well as ceasefires in the Middle East, which have helped calm global markets.
Key Highlights:
- Market Outlook: UBS now predicts a stronger performance for U.S. equities through the rest of the year and has increased its target for the S&P 500 accordingly.
- Position on Equities: Despite the positive outlook, UBS maintains a “neutral” stance on U.S. stocks. The firm cites a resilient second-quarter earnings season and a proposed tax and spending package as supportive factors for market growth.
- Earnings Forecasts: UBS has raised its S&P 500 earnings-per-share estimates, projecting $265 in 2025 (a 6% increase) and $285 in 2026 (a 7.5% rise).
- Index Targets: The firm now expects the S&P 500 to reach 6,200 by the end of 2025 and 6,500 by mid-2026. As of Thursday, the index closed at 6,141.02—close to record highs despite earlier volatility this year.
UBS analysts believe the recent rebound in U.S. equities is warranted, noting that most large-cap companies should be able to withstand the effects of tariffs.
Risks Remain:
However, UBS warns that market volatility could continue in the coming months due to uncertainty around former President Donald Trump’s tariff policies. A delay in implementing new tariffs is currently in place but is set to expire in early July.
Additionally, as products affected by existing tariffs begin to hit retail shelves, there could be an impact on economic growth and inflation during the summer. UBS cautioned that if economic data shows a steeper decline than expected, it could pose challenges for the U.S. stock market.
Overall, while UBS sees room for growth, it also acknowledges the potential for short-term risks due to trade and policy uncertainties.