Investing.com -- UBS has pushed back against market expectations for a more aggressive Federal Reserve, arguing that recent moves in U.S. Treasury yields overstate the likelihood of rate hikes and that investors should stay focused on resilient corporate fundamentals.

In a note on Thursday, UBS noted that core inflation has been slower to fall than anticipated, prompting the bank to push back its expectations for the resumption of Fed easing to the December meeting, followed by a further cut in March 2027.

But the Swiss bank stopped short of endorsing the more hawkish pricing now embedded in markets.

"We believe there is a high bar for Fed rate hikes, despite more hawkish recent market pricing," UBS wrote, pointing to trend wage growth below 3.5% and anchored inflation expectations as reasons not to overreact.

Ten-year U.S. Treasury yields initially rose five basis points to 4.53% on Thursday, while two-year yields climbed four basis points to 4.07%, reflecting renewed inflation concerns tied to Middle East tensions and higher energy prices.

UBS said it "would not interpret the latest rise in yields as a reason to abandon risk assets, but rather as a reason to remain disciplined on duration and portfolio construction."

The bank maintained its constructive view on equities, forecasting S&P 500 earnings-per-share growth of 20% this year, supported by a first-quarter earnings season in which underlying profits grew 19%, the fastest pace in four years, and around 80% of companies beat both sales and earnings estimates.

UBS has a year-end S&P 500 target of 7,900.