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Investing.com -- Despite recent market volatility and a dip in investor confidence, UBS analysts maintain a positive outlook on the US equity bull market.
In a note to clients on Friday, the firm acknowledged the market’s sensitivity to "fast-moving headlines," including new tariff announcements and concerns about tech sector growth.
Investor sentiment has notably weakened, with surveys showing a significant drop in bullish expectations, according to the bank.
However, UBS points out that "very low sentiment readings tend to be a contrarian indicator."
They add that historically, periods of low investor confidence have often been followed by strong market performance.
UBS attributes the recent market jitters to a confluence of factors, including Federal Reserve policy, persistent inflation, and geopolitical uncertainties.
The firm also highlights the impact of new tariff announcements on trade with Mexico, Canada, and China, contributing to market anxieties.
Despite these concerns, UBS believes the fundamentals supporting the bull market remain strong.
They anticipate continued economic and profit growth, alongside supportive Federal Reserve policies and ongoing investment in artificial intelligence. They also foresee "solid earnings growth of 8% for the S&P 500 this year."
UBS suggests that the tariff measures are likely part of a broader negotiation strategy.
They expect ongoing bilateral talks and potential deals to mitigate the long-term impact of these tariffs. The firm anticipates that the Trump administration will avoid measures that could significantly harm economic growth.
While maintaining a bullish outlook, UBS advises investors to prepare for continued volatility.
“Instead of retreating from the markets in the face of uncertainty, we believe hedges are worth considering for investors to navigate volatility ahead. Capital preservation strategies can help manage downside risks in equities, while exposure to quality bonds and gold can help stabilize and diversify portfolios,” concluded UBS.