In a recent update, UBS has once again raised its year-end price target for the S&P 500, now setting it at 5,900, with a bull-case scenario target of 6,500. This marks the fourth increase in the bank’s price target this year and reflects potential upside of 7% and 17% respectively from current levels.
The decision to raise the price target is backed by UBS’s positive outlook on the market conditions, driven by factors such as profit growth, disinflation, and increasing investments in AI technologies. According to David Lefkowitz, the head of US equities at UBS, the strong 16% year-to-date rally in the stock market has been supported by solid earnings growth, a trend that is expected to continue well into 2025.
UBS projects that S&P 500 earnings per share will reach $250 this year, representing an 11% year-over-year growth, followed by an 8% growth to $270 in 2025. While these estimates would lead to a historically high price-to-earnings multiple for the S&P 500, Lefkowitz believes it is justified given the favorable macro environment.
The bull-case scenario outlined by UBS is predicated on the continued advancement of AI technologies, stronger-than-expected economic growth, and cooler-than-expected inflation. If these factors align, the stock market’s P/E multiple could surge even higher.
Despite recent cooling in economic growth trends, UBS remains optimistic about the market outlook, citing a healthy labor market with 1.2 job openings for every unemployed worker and rising real wages. This solid jobs market is expected to support further gains in the stock market moving forward.
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