UBS expects the Federal Reserve to cut rates by a further 75 basis points by the end of the first quarter of 2026, saying policymakers are likely to lean toward supporting the labor market over reacting to what it views as a temporary inflation bump from tariffs. With the funds rate still above neutral, UBS argues the Fed has room to ease without stoking lasting price pressures.
Equities are seen as well supported by broad-based earnings strength:
- nearly 80% of S&P 500 companies beat sales estimates
- and healthy household and corporate balance sheets.
- UBS forecasts earnings growth of 8% this year and 7.5% in 2026
- while deregulation provides an additional policy tailwind.
- Longer term, the bank points to AI as a transformational driver, estimating the annual global revenue opportunity could reach $1.5 trillion.
On that basis, UBS projects the S&P 500 at 6,800 by June 2026, with a bull-case scenario of 7,500. The bank advises phasing into positions and using market pullbacks to add exposure, highlighting AI, energy and resources, and longevity themes as preferred areas.
