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Investing.com -- UBS expects the U.S. stock rally to extend well into next year, forecasting the S&P 500 to reach 7,300 by June 2026, implying around 6% upside from current levels.
The bank said in a note Tuesday, headed by Ulrike Hoffmann-Burchardi, Chief Investment Officer for the Americas and Global Head of Equities at UBS, that “all three key drivers of market performance—earnings, monetary policy, and investment—are currently supportive.”
“U.S. equities overcame recent volatility to notch new record highs,” UBS noted, citing cooler September inflation data that confirmed “the Federal Reserve is on track to cut interest rates this week.”
The bank believes that the Fed’s easing cycle is providing “a favorable macro environment,” as softer inflation and a gradually weakening labor market justify further rate cuts through early 2026.
UBS also highlighted that data since 1970 show the S&P 500 delivers its best returns, around 15% annualized, when the economy is not in recession and the Fed is cutting rates. The bank expects growth to continue even after rate cuts end, supporting further stock gains.
Earnings are also providing a lift. “A strong start to the third-quarter results suggests solid earnings growth,” UBS wrote, noting that roughly a quarter of the S&P 500’s market capitalization has reported results with “beats higher than the historical average.” Corporate profit growth is on track to exceed the firm’s initial 10% estimate for the quarter.
UBS also pointed to booming demand for artificial intelligence infrastructure. “Strong demand for computational resources should underpin robust AI capital spending,” UBS commented, adding that soaring token consumption and new AI applications will sustain investment momentum.
UBS maintains an “Attractive” view on U.S. equities and advises underallocated investors to “consider adding exposure” to sectors tied to AI, power and resources, and longevity.