UBS says further Fed easing, resilient growth and broadening sector support should keep U.S. equities on track for an S&P 500 move to 7,700.
Summary:
UBS reaffirmed its 7,700 year-end target for the S&P 500, maintaining a constructive outlook for U.S. equities.
The bank expects Federal Reserve rate cuts to remain a tailwind, even as the Fed pauses its easing cycle in the near term.
UBS said softening labour market conditions and contained inflation should allow further policy easing in coming months.
The bank continues to favour health care stocks, despite near-term pressure from U.S. Medicare Advantage policy decisions.
Cloud revenue growth and AI moving into higher-value application layers are seen as additional supports for equities.
UBS has reiterated its bullish stance on U.S. equities, arguing that a supportive macro backdrop and further monetary easing from the Federal Reserve should continue to underpin stock market gains. In a note released on Wednesday, the bank reaffirmed its 7,700 year-end target for the S&P 500, signalling confidence that equities can push higher despite near-term policy uncertainty.
UBS said that while the Federal Reserve is widely expected to pause its rate-cutting cycle at the upcoming policy meeting, this should not be interpreted as the end of easing. The bank expects further rate reductions later in the year as economic data evolves. In particular, UBS pointed to emerging signs of weakness in the U.S. labour market alongside inflation that remains contained, conditions that it believes will give policymakers room to lower borrowing costs further.
Against this backdrop, UBS expects monetary policy to remain a key tailwind for risk assets. Lower interest rates would help support equity valuations, ease financial conditions and encourage broader participation across the market, rather than gains being concentrated in a narrow group of stocks.
From a sector perspective, UBS said it continues to favour health care, even after recent concerns around insurer profitability following the Trump administration’s Medicare Advantage rate decision. While acknowledging near-term headwinds, the bank views the sector as attractively positioned given defensive characteristics and longer-term earnings potential.
Beyond traditional defensives, UBS also highlighted ongoing strength in technology-related themes. Continued cloud revenue growth and the progression of artificial intelligence beyond infrastructure into intelligence and application layers are expected to provide incremental support for corporate earnings and market performance.
Overall, UBS sees the combination of easing financial conditions, resilient growth drivers and broadening sector participation as supportive for equities. The bank expects U.S. stocks to remain well supported through the remainder of the year, with gains extending beyond a narrow set of mega-cap names and lifting the broader market toward its 7,700 S&P 500 target.
