UBS Predicts S&P 500 to Reach Bull-Case Forecast of 5,300, Exceeding 7% Growth Rate
According to UBS analysts, the S&P 500 is on track to hit its bull-case forecast of 5,300, with a growth rate that is expected to exceed 7%. In a recent report, analysts at UBS highlighted that 77% of companies are beating earnings per share (EPS) estimates, while 65% are exceeding revenue expectations, both of which are better than average. These positive results align with UBS’s more bullish projection, which predicts the S&P 500 ending the year at 5,300.
With 80% of companies having reported earnings, the numbers have surpassed expectations, noted UBS analysts. Initially, the analysts had anticipated earnings growth of 4-5% for the fourth quarter, excluding one-time charges related to banks replenishing the FDIC bailout fund. However, the growth rate is now expected to exceed 7%. Even the average S&P 500 company is projected to see a growth rate of around 6%, according to UBS.
Furthermore, the guidance provided by companies this quarter has also shown positive signs. While the S&P 500’s first-quarter forecast is adjusting downward in line with seasonal trends, the annual projection for 2024 for the median company remains stable. The aggregate earnings forecast for the next 12 months for the S&P 500 is on an upward trajectory, indicating improvements across all sectors except for energy and materials.
The positive earnings season is contributing to an optimistic market outlook, bolstered by solid economic growth, moderating inflation, anticipated Federal Reserve rate reductions, and significant demand for AI infrastructure. UBS’s more bullish projection of the S&P 500 ending the year at 5,300 is further supported by these factors.
Solita Marcelli, Chief Investment Officer Americas at UBS Global Wealth Management, commented on the market rally, stating, “markets are pricing in plenty of good news.” Marcelli highlighted that the MSCI US is trading at a 20% premium to the 15-year average, and the S&P 500 is now trading near the 5,000 level, which is the expected year-end target in the event of a soft landing.
However, Marcelli also emphasized the need for further positive signs on inflation, Federal Reserve policy, and growth, including from data and earnings releases in the coming weeks. UBS’s bull-case scenario implies approximately 5.5% upside from the current levels, indicating potential future market gains.
Analyst comment
Positive news. The S&P 500 is predicted to reach 5,300, exceeding a 7% growth rate. Positive earnings results and guidance from companies, along with solid economic growth and expected rate reductions, contribute to the optimistic market outlook. The market is pricing in good news, but further positive signs are needed on inflation, Federal Reserve policy, and growth. Potential future market gains are expected.
