• UBS (UBS) maintains an "attractive" rating on U.S. equities, forecasting S&P 500 earnings growth of 10% in 2026, potentially lifting the index to around 7,700.
  • The bank cites robust corporate profits, especially in tech, combined with easier monetary policy and upcoming tariff clarity as key drivers for continued market strength.
  • Investors under-allocated to stocks are advised to add positions, with UBS highlighting favorable conditions where the economy avoids recession amid Fed rate cuts.

UBS projects the U.S. stock market's 2025 rally will persist into 2026, driven by a confluence of supportive factors that have kept valuations moderate despite elevated price levels. According to people familiar with the matter, the bank's assessment hinges on strong earnings momentum, with S&P 500 earnings per share expected to reach $305 in 2026, following an estimated 11% gain in 2025. This earnings trajectory, particularly in technology and other high-value sectors, provides fundamental underpinning for equity markets, even as the S&P 500 has already seen significant appreciation.

Monetary policy remains a critical pillar of UBS's optimistic outlook. The Federal Reserve's easing bias is intact, with market expectations favoring a 25-basis-point rate cut in the near term, according to recent analyses. The softening labor market, where unemployment has reached its highest level in nearly four years, keeps policymakers data-dependent and inclined toward further cuts. The arrival of a new Fed chair could add clarity to the policy direction, bolstering investor confidence amid ongoing economic reacceleration expected in the second half of 2026, supported by targeted fiscal measures like tax cuts.

Efforts to reduce uncertainty are gaining traction, with upcoming policy announcements on tariffs poised to alleviate pressures on business investment and consumer sentiment. Greater clarity here would offer companies better visibility for long-term planning, a point emphasized by UBS analysts in recent briefings. Meanwhile, consumer fundamentals remain solid despite some softness in retail sales; U.S. households carry the lowest debt burden in over 40 years, excluding the COVID period, which supports spending resilience.

Globally, UBS anticipates around 10% gains for the MSCI AC World index in 2026, with the Swiss Market Index expected to appreciate about 5%. The firm favors technology, healthcare, utilities, and banking sectors in the U.S., while in international markets, "European leaders" are seen as well-positioned for policy-driven growth. In Asia-Pacific, Australia, Japan, and China's technology sector are highlighted as attractive opportunities. This geographic diversification aligns with UBS's track record: in 2025, international markets like MSCI Europe, China, and emerging indices outperformed U.S. equities, posting returns of 15%, 36%, and 31%, respectively.

Without sustained earnings growth and policy support, markets might face headwinds, but UBS's analysis suggests stocks historically perform best when the economy avoids recession amid Fed rate cuts—conditions currently in place. The bank advises investors to stay positioned for continued growth, noting that its 2025 forecast, which predicted the S&P 500 rising to 6,600, has largely materialized, lending credibility to this outlook. As one analyst paraphrased, "It's a favorable backdrop where fundamentals and policy align to extend the rally." Attempts to reach UBS for additional comments were not immediately successful.

Correction: An earlier version misstated the expected S&P 500 earnings per share for 2026; it is $305, not $300.