U.S. equities remain attractive despite lofty valuations, according to UBS. In a note released Thursday, the bank acknowledged that the S&P 500 is trading at about 22 times forward 12-month earnings—a level that ranks in the top 5% since 1985 and has sparked investor concerns over expensive pricing.
UBS argued, however, that valuation alone is not a reliable guide to short-term market performance
- historically, high multiples have not had a strong relationship with returns over the following 12 months
Instead, the bank pointed to robust corporate earnings and the prospect of easier monetary policy as key supports for the market:
- strong earnings momentum
- easing Fed policy
have tended to help stocks advance despite more demanding valuations.
With rate cuts expected to resume later this month, the firm sees the backdrop for equities as constructive.
