UBS Raises S&P 500 Target to Bullish 5,600, Highest Among Major Brokerages

As a sign of confidence in the US stock market, UBS Global Research became the most bullish brokerage on Wall Street, raising its year-end target for the S&P 500 index to a street-high of 5,600. This upgraded forecast, announced on May 28th, 2024, signifies a potential upside of 5.6% from the S&P 500’s closing of 5,304.72 on the previous day.

This revision comes after UBS had previously increased its target to 5,400 in February, citing positive factors like higher US inflation that could benefit corporate profit margins through pricing power. The current adjustment reflects a continuation of that optimism, placing UBS at the forefront of bullish predictions for the S&P 500’s performance in 2024.

Several factors are underpinning UBS’s bullish outlook. The brokerage highlights solid and broadening profit growth for US companies. Earnings season has delivered better-than-expected results, prompting UBS to adjust its S&P 500 earnings per share (EPS) estimates upwards by $5 for 2024 and 2025. This translates to an anticipated 11% EPS growth for 2024, reaching $250, and a further 6% increase to $265 in 2025.

Another critical element in UBS’s bullish stance is disinflation. While inflation remains a concern, UBS anticipates it will moderate throughout the year. This disinflationary trend, coupled with expectations of a potential shift in Federal Reserve policy, is seen as a positive for stock prices.

The Federal Reserve’s monetary policy path is a closely watched variable. Though policymakers have downplayed the need for imminent rate cuts, some analysts believe a pivot towards a more accommodative stance could be on the horizon. UBS factors in the possibility of rate cuts later in the year, further bolstering the market.

Finally, UBS emphasizes the ongoing surge in investment within the artificial intelligence (AI) sector. This technological advancement is seen as a driver of innovation and economic growth, creating opportunities for AI development and application companies.

UBS’s bullish call joins a chorus of optimism from other major brokerages. Deutsche Bank recently raised its 2024 S&P 500 target to 5,500, citing corporate solid earnings. Similarly, BMO Capital Markets predicted a 5,600 finish for the index earlier in May.

It’s important to remember that these targets are just predictions, and the stock market can be unpredictable. Factors like unforeseen economic events, geopolitical tensions, and policy changes can all impact market performance.

However, UBS’s upward revision signifies a strong belief in the positive fundamentals supporting the US stock market. Solid corporate earnings, disinflation, and potential changes in monetary policy create a supportive environment for continued growth in the S&P 500. Investors should carefully consider their risk tolerance and investment goals before making decisions based on market forecasts.

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