UBS upgrades global equities: Bull market still has room to run

Investing.com -- UBS has upgraded global equities to Attractive, arguing the bull market that began nearly four years ago still has room to run despite record index levels and concerns about AI exuberance.

The bank points to three factors over the past month that it says have strengthened the case for staying invested.

First, strategists led by Mark Haefele highlight renewed momentum in AI investment, citing “multi-billion-dollar partnerships between hyperscalers and AI chip firms” that reinforce expectations for sustained capital expenditure.

They note that the technology cycle now goes beyond chatbot adoption, with growing focus on autonomous “agentic AI” and physical applications like robotics and self-driving systems.

Even with nearly $1 trillion already planned in capital expenditure (capex), strategists argue that spending could still fall short of what is likely needed.

“We therefore believe that investment growth is likely to continue over the next year,” the strategists wrote.

Supportive U.S. policy is another pillar for the upgrade. The Federal Reserve has resumed interest rate cuts, and UBS analysis finds that easing cycles outside recessions have historically been positive for equities.

The strategists also point to fiscal measures such as capex and R&D expensing and lighter regulation, which they say could provide a “modest tailwind” to cyclical sectors moving into 2026.

Lastly, the team also flags a stronger U.S. macro backdrop. Recent data has exceeded expectations, and Fed Chair Jerome Powell acknowledged the economy “may be on a somewhat firmer trajectory than expected” with consumers still spending.

“Middle- and high-income households continue to benefit from wealth effects and consumer spending is resilient, which we expect will support corporate earnings,” the strategists said.

UBS has raised its S&P 500 earnings forecasts to $275 per share for 2025 and $295 for 2026, both $5 higher than before, implying earnings growth of 10% and 7% respectively.

Against that backdrop, the bank says investors should reassess their allocations and ensure equity exposure is at least aligned with, if not slightly above, long-term targets.

Those underweight equities should consider shifting excess cash, bond or high-yield credit positions toward stocks.

Within equities, UBS favors exposure to secular growth themes such as U.S. and Chinese technology, transformational innovation sectors including AI, power and resources and longevity, and markets with catalyst potential like Japan and global banks.

China’s tech sector is rated among its most attractive globally.