Investing.com -- UBS has hiked its S&P 500 target to 6,400 for June 2026, citing stronger-than-expected earnings and a more optimistic economic outlook for the second half of the year.
The bank also raised its year-end 2025 target for the index to 6,000, up from a previous forecast of 5,800.
The upgrade reflects a revised earnings per share (EPS) forecast for the index, now projected at $260 for 2025 and $280 for 2026, up from prior estimates of $250 and $275, respectively.
The investment bank recently downgraded its view on U.S. equities from Attractive to Neutral following a sharp rebound in stock prices and a de-escalation of trade frictions.
“With the S&P 500 forward price-to-earnings (P/E) now above 21x, it appears that investors are already pricing in a substantial de-escalation in trade frictions,” the UBS team led by David Lefkowitz said in a note.
The June 2026 price target represents a roughly 8% gain from the current level of 5,940 as of May 20. Despite a more cautious near-term outlook due to trade-related uncertainties and potential economic softening, UBS maintains that the bull market remains intact.
“We still believe the bull market is intact and stocks can continue to move higher over the coming year,” the strategists continued.
They acknowledge the headwinds posed by elevated tariffs and the possibility of renewed trade tensions, but remain constructive on the broader market. This outlook is underpinned by expectations for real wage growth, clearer tax policy, deregulation, and possible rate cuts.
Moreover, the strategists continue to see strength in key sectors. Notably, continued investment in AI is flagged as a major driver, with companies like Meta (NASDAQ:META) and Microsoft (NASDAQ:MSFT) voicing robust capital spending plans.
“Continued investment spending and AI adoption is an important driver for U.S. equities,” the strategists emphasized.
UBS’ base-case scenario envisions a steady macro backdrop with improving economic data later this year.
However, the report also outlines a wide range of potential outcomes, including an upside scenario where the S&P 500 could hit 6,700 by December 2025 if trade policies ease and AI delivers outsized productivity gains.
Conversely, a hard landing could push the index down to 4,500.
For now, UBS advises a balanced view. “To recap, we think the risk-reward in U.S. stocks is slightly more balanced in the near term,” the strategists concluded, while reaffirming their June 2026 target.
By sector, the bank remains selective. Information technology stands out as a top pick, driven by robust AI-related spending and supply constraints.
Communication Services are also rated Attractive, particularly among internet platforms benefiting from AI.
Furthermore, UBS sees Healthcare as well-positioned, citing attractive valuations and earnings upside potential, while Utilities are another preferred area, offering defensive traits and exposure to growing power demand from AI infrastructure.