UBS says bull market has further to run

Investing.com -- UBS lifted its S&P 500 earnings and index targets in a note this week, citing a stronger profit outlook and growing confidence that growth can hold up through next year.

The bank now expects S&P 500 earnings per share of $350 in 2026 and $400 in 2027, up from prior estimates of $335 and $375, representing growth of 25% and 14% respectively. It lifted its S&P 500 targets to 8,100 for December 2026 and 8,400 for June 2027.

Strategists led by David Lefkowitz said the upward revision was driven primarily by stronger-than-expected earnings from semiconductors, technology hardware and energy, though profit expectations were nudged higher across virtually every segment of the market.

UBS noted that the rally has become increasingly broad-based, with an exceptionally strong second-quarter earnings season and improving conditions in more cyclical parts of the economy, including manufacturing activity and job growth in construction.

The bank highlighted three pillars supporting its Attractive view, with resilient economic growth, a patient Federal Reserve and accelerating AI adoption.

It expects inflation to moderate in the second half as tariff effects roll off, underpinning its view that the Fed stays on hold. "We don't think the Fed is going to take away the punch bowl," UBS wrote.

Risks include sustained oil price gains, renewed inflation or evidence that AI investment is generating weaker-than-expected returns. Its downside scenario puts the index at 5,500 by June 2027, against an upside case of 9,500.

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