UBS said U.S. equities should remain supported as the Federal Reserve’s easing cycle unfolds without recession, with further gains underpinned by advances in artificial intelligence, solid earnings and resilient consumption.
The bank pointed to AI as a structural driver, noting that company-specific developments have already lifted names such as Intel, Broadcom and Oracle. UBS forecasts global AI capital expenditure to climb 67% to USD 375 billion in 2025 and another 33% to USD 500 billion in 2026, with strong demand for computing capacity and improving monetization trends reinforcing the outlook.
Earnings momentum also remains robust, with S&P 500 corporate profits rising 8% in the second quarter versus the bank’s earlier forecast of 5%. Nearly four out of five firms beat sales estimates, while the median EPS beat was stronger than average at 4.3%. UBS expects S&P 500 EPS to reach USD 270 this year, up 8%, and USD 290 in 2026, up 7.5%.
On the macro side, consumer spending continues to cushion the economy, with retail sales rising for three straight months and August data topping expectations. While the labor market is showing some weakness, household and corporate balance sheets remain healthy, UBS said. Deregulation efforts from Washington could also add support to growth.
Still, the bank cautioned that valuations are high relative to long-term averages, making a period of consolidation likely after the recent strong run. UBS’s base case sees the S&P 500 reaching 6,800 by June 2026, while a bull-case scenario could take the index to 7,500. It advised investors to add exposure on market dips, with a focus on IT, financials, health care, communication services and utilities.
