UBS raises its estimation for the S&P 500 to 5,900 and says it could spike as high as 6,500

UBS increased its S&P 500 year-end price prediction to 5,900, citing a favourable climate for US stocks.

The index's mid-2025 objective of 6,200 was likewise established by the Swiss investment group, which expressed optimism about the market's future.

A number of important reasons, such as strong profit growth, disinflation, expected rate reduction from the Federal Reserve, and a spike in artificial intelligence (AI) investment, are the basis for the most recent call.

In a note, UBS strategists stated, "The market P/E is high but reasonable in the context of the favourable macro environment."

UBS has raised its growth rate estimate to 8% for 2025, or $270 per share, from its previous expectation of 11% profit growth for the S&P 500 in 2024, or $250 per share.

The main factor behind the updated objectives is thought to be this expansion of profits growth. Although the market's price-to-earnings (P/E) ratio is high, the brokerage company believes it is appropriate given the current positive macroeconomic environment.

The current disinflationary trends are a positive factor for the investment climate, and the background for U.S. equities is considered supportive.

Furthermore, it is believed that the Federal Reserve's anticipated shift towards rate reductions will support equities.

One important element supporting the optimistic forecast for US shares is the increase in AI investment.

Overall, UBS does not rule out a rise over 6,000 in the event that the macro environment stays favourable.

"We believe investors should be open to the upside prospect that values rise further higher, even if it is not our base scenario. The Fed is probably going to decrease rates in response to a surge in innovation and investment, which may raise more animal spirits.

"In this scenario, an upside target of 6,500 by year-end is not out of the question," UBS said.

(Sources: investing.com, reuters.com)