2024-07-26 13:06:21
UBS analysts have raised their forecast for the American S&P 500 stock index by the end of this year to 5,900 points from the previously expected 5,500 points, MarketWatch reports, Day.Az reports with reference to Interfax.
According to their estimates, by the middle of next year the indicator will rise to 6200 points, while previously 5600 points were expected.
The backdrop for the U.S. stock market is favorable due to strong growth in corporate profits, slowing inflation, the Federal Reserve’s move to lower interest rates and a sharp increase in investment in artificial intelligence, experts say.
“While economic growth indicators have weakened, we believe the economy remains on solid footing. Healthy labor market dynamics should continue to support further growth in consumer spending,” the report said.
Analysts at UBS, like most of their colleagues at other banks and investment firms, expect the Fed to begin cutting rates in September.
The second-quarter earnings season has started well, although mega-cap tech companies have yet to report. UBS kept its forecast for average earnings per share at $250 this year but raised its 2025 estimate to $270 from $265.
“Historically, when the Fed cuts rates in the context of a ‘soft landing,’ equities tend to perform well in the 12 months before and after the first rate cut,” UBS said in a note.
Meanwhile, in a worst-case scenario, the bank’s analysts predict the S&P 500 will fall to 4,800 points this year if inflation remains persistent, higher rates put pressure on economic growth and/or geopolitical tensions escalate.
The S&P 500 closed at 5,544.59 on Thursday, up 16.2% year-to-date.
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