UBS is projecting that U.S. equity market strength will extend into 2026, with the S&P 500 positioned for another major advance as earnings growth, looser financial conditions, and reduced policy uncertainty converge.
The Swiss banking giant argued that the rally has been underpinned by corporate performance rather than speculative excess.
In an investor note dated December 22, UBS said strong profit growth, particularly among large technology firms, has supported share prices without pushing valuations to unsustainable levels, keeping the market’s foundation intact heading into next year.
UBS expects corporate earnings across the S&P 500 to expand by roughly 10% in 2026. Based on that outlook, the bank sees scope for the index to climb toward the 7,700 area by year-end, assuming earnings remain the primary driver of price gains.
The bank also anticipates the Federal Reserve will continue easing into early 2026 as inflation cools, lowering borrowing costs and supporting risk assets. An upcoming change in Fed leadership is expected to reinforce a more accommodative policy stance, further improving market conditions.
UBS additionally pointed to improving visibility on trade and regulatory issues as supportive. Legal clarity around tariff authority expected in early 2026 could help reduce investor uncertainty, even if any direct economic impact proves temporary.
Despite the potential for near-term pauses, UBS remains bullish on U.S. equities, maintaining an attractive rating as earnings growth, easier monetary policy, and improving policy clarity support a continued S&P 500 rally into 2026.
Wall Street divided on U.S. stock market
Beyond the UBS outlook, major Wall Street banks remain divided on the S&P 500’s 2026 trajectory as the index trades near record highs.
Bank of America is the most cautious, projecting the benchmark to end 2026 around 7,100, citing valuation pressure, heavy concentration in large-cap technology and AI stocks, and risks to earnings from weakening consumption.
By contrast, most banks see further upside driven by earnings growth, AI investment, and easier monetary policy. JPMorgan sees the S&P 500 reaching 7,500, with potential to exceed 8,000 if rate cuts accelerate, while Goldman Sachs targets 7,600 and Morgan Stanley forecasts 7,800.
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