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The investment bank remains neutral on US equities, meaning that investors should maintain allocations in line with their long-term financial plan.
This outlook should be supported by a healthy earnings season, with UBS expected earnings growth to broaden out beyond the Magnificent 7.
“America’s top seven growth and tech firms collectively accounted for all of the US market’s profit expansion over the past four quarters. We expect this to change in the first quarter,” UBS wrote.
“This partly reflects a positive economic backdrop, with surveys pointing to a renewed improvement in manufacturing sentiment at the same time as banks are easing lending standards—both of which have a good correlation to S&P profits.”
The bank’s S&P 500 price targets for June and December are 5,100 and 5,200, respectively, compared to 5,062 at the end of trading on 15 April. In its upside scenario, UBS thinks the S&P 500 could reach 5,500 by the end of the year. However, that outcome would likely be achieved if inflation pressures ease more quickly or corporate profit growth is stronger than expectations.
