①According to UBS, the rise in US stocks is not over yet, and it is still expected to achieve a double-digit increase by the end of next year; ②The bank's strategist predicts that since the beginning of this year, the S&P 500 index has repeatedly hit new highs, with a year-to-date increase of over 23%. Whether the bull market is coming to an end has become a hot topic in the market. In UBS's view, the rise in US stocks is not over yet, and it is still expected to achieve a double-digit increase by the end of next year.
UBS strategist recently predicted in a report, $S&P 500 Index (.SPX.US)$ will reach 6600 points by the end of next year, with the upward momentum coming from the prospect of the US economy not experiencing a downturn.
In the scenario of the US economy not experiencing a "hard landing", economic growth continues, the job market remains strong, and inflation and interest rates may still be slightly higher than market expectations under the previous hard or soft landing scenarios.
UBS's forecast suggests that the S&P 500 index will rise by nearly 13% from its current level.
On Monday Eastern Time, the three major US stock indexes showed mixed movements, with the S&P 500 index posting a slight decline. At the close, the S&P 500 index fell by 0.18% to 5853.98 points. The S&P 500 index hit an all-time high last Friday and achieved a six-week winning streak.
"The most important thing is that the improvement in the US macroeconomic outlook has increased our optimism about the stock market. We have raised our rating on US stocks from neutral to attractive." UBS strategists stated in the report. They pointed out that data shows a solid foundation in the US economy.
Despite tightening financial conditions and rising interest rates, the US labor market continues to show resilience. According to data from the US Bureau of Labor Statistics, the US added 0.254 million jobs in September, far exceeding the expected 0.147 million. At the same time, the unemployment rate dropped to 4.1%, nearing historical lows.
US economic activity remains strong as well. Retail sales increased by 0.4% in September, above expectations; and GDP grew by 3% year-on-year in the second quarter.
Meanwhile, the inflation rate is approaching the Federal Reserve's 2% target. In September, the Consumer Price Index (CPI) rose by 2.4% year-on-year, while the Personal Consumption Expenditures Index (PCE), a preferred inflation gauge by the Fed, increased by 2.2% year-on-year in August, the lowest level since 2021.
UBS Group stated that the cooling of inflation sets the stage for the Federal Reserve to continue cutting interest rates, which is favorable for the stock market. According to the Fedwatch tool from the CME Group, the market expects a 72% chance of another 50 basis point rate cut by the Fed before the end of the year.
UBS strategists also stated that although investors may see some volatility before the November election, it is unlikely to disrupt more positive market catalysts.
"The US presidential election is unlikely to disrupt the positive fundamentals. We expect that due to neither party having a clear advantage in the key swing states determining the election results, market volatility will increase before the election. However, this election is taking place against the backdrop of Fed rate cuts, strong US economic momentum, and favorable long-term trends such as artificial intelligence.
Given the recent start of the Fed rate-cutting cycle, Wall Street strategists are generally optimistic about the outlook for US stocks. International major banks including Goldman Sachs, UBS, and Deutsche Bank have recently raised their year-end target price for the S&P 500 index.
Editor/Rocky
