UBS sees supportive macro backdrop sustaining global equity rally

Investing.com -- Global equities have rebounded to all-time highs and UBS believes the rally has further to run, with a combination of solid fundamentals, easing tariff headwinds and structural growth trends expected to drive broad-based earnings gains through 2026.

Strategist Fabian Deriaz says "the overall macro backdrop remains constructive, supported by easing tariff headwinds, expected Fed rate cuts, supportive fiscal policies, and a recovery in manufacturing."

UBS maintains an Attractive view on global equities and anticipates 12% earnings per share growth for the MSCI AC World Index this year, describing that as "significant and provides a buffer."

The firm acknowledged that markets are pricing in an optimistic outcome given that oil flows remain heavily disrupted, but argues the setup still favors further upside.

UBS added that positioning has not kept pace with prices, with many investors having reduced risk during the escalation phase and missed the rebound, a dynamic Deriaz likens to last April's tariff-driven selloff, when rebuilding exposure helped drive markets to new highs.

On sector and regional preferences, UBS favors industrials globally for their cyclical and structural appeal, and recommends a barbell approach in the U.S. focused on consumer discretionary, financials, health care and utilities.

Preferred markets include the U.S., Japan, emerging markets and Switzerland. Within AI, UBS is taking a more selective approach, focusing on opportunities "outside US large-cap tech — particularly among Chinese technology companies."

Key risks to monitor include the timing of any Strait of Hormuz reopening and intensifying competition within technology sectors. UBS also flags crowding in momentum strategies as a potential source of volatility.

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