Investing.com -- UBS analysts remain optimistic about the U.S. stock market despite concerns over tariffs and inflation, forecasting the S&P 500 to rise to 6,600 by year-end, though they caution that the path forward may involve heightened volatility.
“We continue to see a favorable fundamental picture that should underpin further stock gains,” UBS stated, citing resilient corporate earnings and solid consumer spending.
According to the bank, 75% of the S&P 500’s market capitalization has reported Q4 results, with 60% of companies beating sales estimates and 75% surpassing earnings forecasts.
UBS now expects S&P 500 earnings growth of 9% in 2025, at the high end of its prior 7-9% projection.
Despite slower job growth in January, the labor market remains strong, UBS noted. Nonfarm payrolls rose by 143,000, below the 170,000 consensus estimate, but the unemployment rate dropped to 4.0%, marking its lowest level since May 2024.
Additionally, wage growth exceeded expectations, reinforcing the idea that labor market-driven inflation pressures have not fully subsided.
UBS expects the Federal Reserve to resume cutting rates later in 2025, with the first 25-basis-point cut likely in June. Inflation data due later this week should provide more clarity, but UBS believes core inflation will continue to moderate.
On trade policy, UBS views Trump’s latest tariff threats as part of a negotiating strategy, noting that the administration is unlikely to risk jeopardizing economic growth.
The firm maintains its bullish stance on U.S. equities, advising investors to focus on portfolio diversification and hedging strategies to manage volatility. Gold remains an attractive hedge, with UBS recommending a 5% allocation within a USD-balanced portfolio.