Analysts at UBS have released a fresh outlook for the stock market, promising cautious optimism despite the ongoing economic surprises that have kept investors on their toes. The S&P 500 soared to record highs in mid-July before pulling back on concerns about potential shifts in US trade policy.
The investment bank remains bullish, however, saying that the market remains on solid footing. The experts are certain that there are multiple factors contributing to the market's strength. The economy and corporate earnings are growing, while inflation is finally slowing, they point out. Despite a recent dip of 2%, the S&P 500 has gained 15% since the start of the year and continues to trade near all-time highs.
UBS also highlights the likelihood that the Federal Reserve will soon begin to lower interest rates. The US central bank is widely expected to deliver its first rate cut as early as September. The bank expects this move to add impetus to equity markets. The experts are particularly enthusiastic about the technology sector, especially companies involved in artificial intelligence. They view AI investments as a potential jackpot for investors and strongly recommend incorporating some AI exposure into investment portfolios.
Despite recent challenges, UBS sees a bright future for tech stocks. They also advocate for diversification, suggesting that investors consider the so-called Magnificent Seven megacaps of Europe and key companies in Asia. On the national front, UK equities are favored due to expected strong earnings. For those wary of market volatility, UBS recommends capital protection strategies to avoid any regrets.
Thus, UBS paints an optimistic picture for equities based on steady economic growth, easing inflation, and rising AI investment. Its forecast suggests that the S&P 500 could soar to 5,900 by December 2024. The bank is confident that the market is poised for new heights.
