Merchants work on the ground on the New York Inventory Alternate (NYSE) in New York Metropolis, U.S., February 25, 2026.
Brendan McDermid | Reuters
UBS’ high fairness strategist dialed again his view on U.S. shares, citing mounting dangers from a weakening greenback, stretched valuations and coverage turbulence in Washington.
Andrew Garthwaite, head of worldwide fairness technique on the funding financial institution, downgraded American equities to “benchmark” in a completely invested international fairness portfolio, arguing that the elements that powered years of outperformance are beginning to fade.
The greenback threat is a central concern, Garthwaite wrote. UBS forecasts the euro climbing to $1.22 by the top of the primary quarter and sees “uneven structural draw back dangers” to the buck. Traditionally, when the greenback’s trade-weighted index falls 10%, U.S. equities underperform by roughly 4% in unhedged phrases, in accordance with the financial institution.
Overseas markets are trouncing the U.S. this yr as a weaker greenback and cheaper valuations draw capital abroad. The MSCI World ex-US index has gained about 8% in 2026, in contrast with the little modified efficiency for the S&P 500. Japan’s Nikkei 225 has rallied 17% yr to this point, whereas the Stoxx Europe 600 is up 7%, underscoring a pointy rotation away from American equities. U.S. shares struggled once more Friday as buyers fretted over the potential downsides of the synthetic intelligence build-out and protracted inflation at dwelling.
S&P 500 yr to this point
One other pillar of U.S. inventory power — company buybacks — can also be shedding its edge, the financial institution mentioned. The buyback yield within the U.S. is now solely roughly on par with international friends, eroding what had been a key assist for earnings per share progress and investor flows, UBS mentioned. The mixed shareholder yield from dividends and buybacks within the U.S. is now about half that of Europe, the financial institution mentioned.
“The buybacks yield is not distinctive and this had been an necessary driver of funds circulation, EPS and valuation,” Garthwaite wrote.
Valuations add to the unease. UBS calculates that the sector-adjusted price-earnings ratio for U.S. shares is 35% above worldwide friends, versus a mean premium of about 4% since 2010. Roughly 60% of sectors commerce not solely at greater multiples than their international counterparts but additionally above their very own historic premium, the strategist wrote.
Coverage volatility below President Donald Trump is one other headwind. This yr has introduced shifts in tariff coverage, proposals to cap bank card rates of interest, potential limits on non-public fairness funding in housing, renewed scrutiny of drug pricing, and recommendations to curb dividends and buybacks for protection corporations, UBS mentioned.
Nonetheless, the famous strategist stopped wanting turning outright bearish. Garthwaite mentioned the U.S. financial system and equities have a tendency to profit greater than friends when markets are within the early phases of a possible bubble. The financial institution additionally expects synthetic intelligence adoption to outpace most different main areas, with the doable exception of China, serving to maintain earnings progress throughout key industries.
UBS strategist Sean Simonds set a year-end goal of seven,500 for the S&P 500, in contrast with a mean forecast of seven,629 amongst 14 high strategists, in accordance with CNBC Professional’s strategist survey.