UBS Updates Year-End S&P 500 Target to 5,500 Amid Strong Economic indicators

In a recent market analysis report, UBS has adjusted its year-end target for the S&P 500 to 5,500, up from its previous estimate of 5,200. This revised forecast comes as U.S. equities continue to experience robust growth, supported by solid earnings performances and significant investments in artificial intelligence (AI).

For the first quarter of 2024, UBS anticipates a 7-9% growth in earnings per share (EPS) for the S&P 500, matching the growth rate seen in the last quarter of 2023. This growth is no longer confined to the tech giants—often referred to as the “Magnificent 7,” which includes Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla—but is beginning to spread across a broader array of sectors.

According to UBS analysts, this broader growth trend is expected to pick up pace throughout the year. “For the first time since the fourth quarter of 2022, we are seeing positive growth projections extending beyond the Magnificent 7,” said David Lefkowitz, CFA, CIO Head of US Equities at UBS Financial Services Inc. “This is a clear indicator of a healthier, more evenly distributed corporate growth environment.”

The overall economic indicators are also supportive of a bullish outlook for the U.S. stock market. Key metrics such as the ISM Manufacturing index have moved into expansion territory, marking a significant improvement in manufacturing sentiment since October 2022. Additionally, easing credit standards and a strong job market with average monthly job gains of 275,000 in Q1 2024 contribute to this positive scenario.

Furthermore, UBS notes the impact of AI as a significant driver of market dynamics. “The AI surge is not just a tech story. It affects a broad range of sectors from semiconductors, which are likely to remain supply constrained, to consumer electronics and industrial components,” said Nadia Lovell, CIO Senior Equity Strategist at UBS.

While consumer spending has shown mixed results, the overall strength in the services sector, supported by travel and other services, indicates sustained consumer confidence, bolstered by ongoing job market strength.

Despite these positive factors, UBS maintains a neutral stance on U.S. equities, advising investors to hold allocations consistent with their long-term strategies. The optimism for a higher S&P 500 target hinges on continuing favorable conditions, including potential Fed rate cuts and easing inflation pressures.

The financial landscape, as outlined by UBS, paints a promising picture for the remainder of 2024, with significant growth potential highlighted by the revised S&P 500 target of 5,500, contingent on sustained improvements in economic and corporate fundamentals.

UBS’s recent revision to a 5,500 year-end target for the S&P 500 aligns with a trend observed across other major financial institutions, which are collectively signaling strong confidence in the S&P 500 potential for growth, with an array of bullish revisions from firms such as Wells Fargo, Oppenheimer Asset Management, and Société Générale. These updates contribute to a growing sentiment that the equity market may continue its upward trajectory, supported by robust economic indicators and advancements in technology, particularly AI, which are expected to drive corporate and economic growth through the year.

Wall Street Firm	S&P 500 Year-End Forecast
Oppenheimer Asset Management	5500
Société Générale	5500
Bank of America	5400
Yardeni Research	5400
Barclays	5300
Goldman Sachs	5200
UBS Global Wealth Management	5500
Fundstrat	5200
RBC	5300
Citi	5100
Deutsche Bank	5100
BMO Capital Markets	5100
Wells Fargo Investment Institute	5535
Morgan Stanley	4500
JPMorgan	4200