-
UBS elevated its S&P 500 year-end worth goal to five,900, marking the fourth enhance from the financial institution this yr.
-
UBS mentioned favorable market situations stay as a consequence of revenue progress, disinflation, and AI investments.
-
It added that the S&P 500 might surge 17% to six,500 by year-end in a bull-case state of affairs.
UBS is as soon as once more elevating its year-end worth goal for the S&P 500.
For the fourth time this yr, UBS raised its worth goal on Thursday, with the financial institution anticipating the S&P 500 to complete the yr at 5,900, representing potential upside of seven% from present ranges.
The financial institution additionally set a bull-case state of affairs goal of 6,500 for the tip of the yr, representing potential upside of 17%.
UBS initially had a year-end worth goal of 4,850. The financial institution raised it to five,150 in January, to five,400 in February, and to five,600 in Could.
“We imagine the market backdrop stays favorable as a consequence of: 1) strong and broadening revenue progress, 2) disinflation, 3) a Federal Reserve pivoting to fee cuts, and 4) surging funding in AI infrastructure and purposes,” UBS CIO head of US equities David Lefkowitz mentioned in a be aware.
Lefkowitz mentioned the inventory market’s robust 16% year-to-date rally has been supported by strong earnings progress, and that development ought to proceed nicely into 2025.
UBS expects S&P 500 earnings per share to hit $250 this yr, representing year-over-year progress of 11%, adopted by 8% progress to $270 in 2025.
These earnings and worth goal estimates would symbolize a traditionally excessive price-to-earnings a number of for the S&P 500, however it’s warranted, in accordance with Lefkowitz.
“The market P/E is excessive, however affordable within the context of the favorable macro atmosphere,” Lefkowitz mentioned.
And the inventory market’s P/E a number of can surge even larger if the bull-case state of affairs outlined by Lefkowitz materializes.
That state of affairs is based on three issues occurring.
-
The continued development of AI applied sciences
“The impression of synthetic intelligence on productiveness and earnings progress is bigger and comes before traders anticipate.”
-
Stronger-than-expected financial progress
“Excessive wages appeal to much more employees into the labor pressure, and demand for labor stays robust. Actual incomes proceed to develop, and family money cushions stay.”
-
Cooler-than-expected inflation
“Lingering inflationary pressures dissipate shortly, and the Fed cuts charges greater than we anticipate, lifting estimates for financial progress and company earnings.”
Lastly, Lefkowitz mentioned that regardless of the current cooling in financial progress developments, “progress stays on strong footing,” with the labor market remaining wholesome at 1.2 job openings for each unemployed employee and rising actual wages.
And that strong jobs market is what ought to finally assist additional positive aspects in inventory market going ahead, in accordance with the financial institution.
Learn the unique article on Enterprise Insider