• UBS lifts its S&P 500 year-end targets to 6,100 for 2025 and 6,800 for 2026, citing strong U.S. growth and reduced tariff risks.
  • Chief Strategist Bhanu Baweja anticipates a temporary dip in 2025 due to slowing growth before a "smart recovery" in late 2026.
  • The call reflects UBS's macro outlook, balancing near-term caution with medium-term optimism as earnings re-accelerate.

UBS Adjusts S&P 500 Forecasts Amid Shifting Macro Landscape

UBS Investment Bank has revised its S&P 500 targets upward but warns investors of a potential slowdown in 2025 before a rebound. Chief Strategist Bhanu Baweja, a top-ranked macro and equity strategist, now projects the index will close 2025 at 6,100 and 2026 at 6,800, up from prior estimates. The upgrade reflects stronger-than-expected corporate performance and easing trade tensions, though Baweja cautions that growth moderation could pressure valuations next year.

"The U.S. economy and earnings have outperformed, and tariff risks have diminished, supporting our higher medium-term targets," Baweja noted in the research update. However, he emphasized that 2025 could see the S&P 500 dip below current levels before staging a late-2026 recovery. The call aligns with UBS's broader macro view of a mid-cycle slowdown followed by reacceleration.

A Cautious Near-Term Outlook

While the 2026 target suggests a 12% upside from the 2025 forecast, Baweja’s team expects volatility in the interim. Slower GDP growth and potential multiple compression could weigh on equities next year, though the firm stops short of predicting a bear market. Instead, UBS frames the dip as a temporary setback within a longer-term bullish trajectory.

Investors may need to navigate a more challenging environment in 2025 before conditions improve. "The recovery won’t be linear," one analyst familiar with UBS’s research said, requesting anonymity because the detailed client note isn’t public. "But reduced trade frictions and resilient corporate margins provide a foundation for the 2026 rebound."

UBS’s research division, which covers thousands of stocks globally, has been gradually adjusting its equity outlook as macro conditions evolve. Baweja, a veteran strategist, has previously highlighted mid-cycle corrections followed by recoveries—a pattern this forecast reinforces. The bank’s clients are likely to weigh the near-term risks against the longer-term opportunity, particularly as earnings visibility improves.

Correction: An earlier version misstated the 2026 target; it is 6,800, not 6,700.