Banking giant UBS expects the S&P 500 to extend its rally, pointing to a combination of several bullish fundamentals.
In a note to investors, the bank’s equity strategists projected that U.S. stocks will benefit from another strong earnings season, with S&P 500 earnings per share expected to rise by about 10% in the third quarter.
“The third quarter earnings season should be supportive of our view that the bull market remains intact,” the bank said.
UBS said this performance reflects solid corporate fundamentals and a supportive macroeconomic backdrop. The bank highlighted resilient consumer spending as a key pillar of its optimistic outlook.
Cooling labour market
While the labor market has cooled somewhat, job growth remains positive, layoffs are limited, and wages continue to rise. These factors, UBS noted, are keeping household demand strong and providing a steady foundation for both the broader economy and corporate profits.
Another driver of optimism is the continued strength in artificial intelligence investment. UBS observed that AI adoption is still expanding, with corporate spending on related infrastructure showing no signs of slowing.
The bank expects revenue growth among cloud service providers to remain robust, while earnings estimates for AI-focused firms could be revised higher in the coming months.
Monetary policy also features prominently in UBS’s outlook. The firm anticipates that Federal Reserve rate cuts, coupled with durable earnings growth, will help sustain favorable market conditions. This, in turn, should bolster investor confidence and support the ongoing bull market.
UBS’s outlook comes as the benchmark index continues to trade near record highs despite recent volatility triggered by escalating trade tensions between the United States and China.
As of press time, S&P 500 was trading at 6,677 up 0.5% for the day and 13% year-to-date.
Indeed, several analysts on Wall Street remain broadly bullish, projecting that the index could potentially reach the 7,000 level by 2026.
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