UBS Boosts S&P 500 Target to 6000 Points on Strong Earnings, AI Investment

UBS has raised its target price for the S&P 500 index from 5800 points to 6000 points, indicating a bullish outlook for the U.S. stock market. The Swiss banking giant also set a target of 6400 points for June 2026, suggesting a continued upward trajectory for equities. This adjustment comes on the heels of strong first-quarter earnings reports from U.S. companies, which have bolstered investor confidence. The positive performance of these companies, coupled with the anticipation of reduced trade tariffs, has led UBS to predict that the U.S. GDP growth rate will accelerate in the second half of 2025. This optimistic outlook is further supported by the expectation that the S&P 500 will rise by 2.7% by the end of this year and by 9.6% by mid-2024.

UBS's revised target reflects a belief that the current bull market in the U.S. is far from over, despite potential headwinds from rising interest rates and geopolitical tensions. The bank's analysis underscores the resilience of the U.S. economy and the robustness of corporate earnings, which have been key drivers of the market's recent gains. The bank's forecast aligns with broader market sentiment, which has been buoyed by a series of positive economic indicators and a supportive monetary policy environment. As the U.S. economy continues to recover from the pandemic, investors are increasingly optimistic about the prospects for further growth in the coming years.

UBS's revised target for the S&P 500 is a clear indication of this bullish sentiment, and it is likely to be welcomed by investors who are looking for further upside in the equity markets. The bank's chief investment officer, David Lefkowitz, has stated that despite the recent downgrade of the U.S. stock market from "attractive" to "neutral," UBS remains optimistic about the market's prospects. Lefkowitz believes that the bull market is intact and that the stock market could continue to rise over the next year. However, he also cautioned that the economy will need to adapt to higher tariffs, which could lead to a period of weaker economic data and pose a mild headwind for the stock market.

Despite the high valuation of the market, with the S&P 500's forward price-to-earnings ratio currently above 21 times, UBS believes that the market's upward momentum will be sustained by the potential reduction in trade tariffs as the U.S. enters into negotiations with its major trading partners. This could provide a catalyst for further gains in the stock market. However, Lefkowitz also warned that trade tensions could flare up again during these negotiations, and that the U.S. economy will need to go through an adjustment period to adapt to the higher tariffs that remain in place. Despite these potential headwinds, UBS expects that the stock market will not face significant downside risks, but rather a mild headwind.

UBS's bullish outlook is further supported by the strong performance of U.S. companies in the first quarter, which has revealed the continued strength of investment in artificial intelligence. Companies like Meta have increased their capital expenditure plans for 2025, while Microsoft reported strong cloud revenue growth and confirmed increased capital expenditure for data centers. This positive sentiment is also reflected in the performance of industrial and power companies that provide services to data centers. Given the strong earnings season and the slightly optimistic outlook for GDP growth in the second half of the year, UBS analysts have revised their earnings per share (EPS) estimates for the S&P 500. They have increased their 2025 EPS forecast from 250 dollars to 260 dollars, an increase of 4%, and their 2026 EPS forecast from 275 dollars to 280 dollars, an increase of 8%. These adjustments reflect confidence in continued investment spending and the application of artificial intelligence, which are key drivers of the U.S. stock market's upward trajectory.