Stock values expected to rise, says UBS
UBS global wealth management chief Mark Haefele predicts a rise in stock values, stating that they are “well supported” despite the S & P 500 more than doubling since its pandemic low in March 2020. Haefele expects the S & P 500 to reach around 5,300 this year, implying a 5.6% increase from current levels. The index traded above the 5,000 level on Friday, after breaching the mark just before Thursday’s close. This positive trend is attributed to better-than-expected corporate earnings and economic data, as inflation continues to decline.
Positive outlook for stocks if “Goldilocks” economic outcome occurs
Haefele states that stocks could rise even further if the U.S. economic scenario aligns with a “Goldilocks” outcome. This refers to a situation where the U.S. economy remains strong while inflation continues to fall, allowing the central bank to cut interest rates. Haefele highlights that such a scenario would be particularly advantageous for small-cap stocks, which have higher reliance on floating-rate debt.
Economic conditions support positive outlook for stock values
While Haefele’s base case predicts the S & P 500 to end the year at around current levels, he notes that current economic conditions are supportive of his bull case. UBS highlights the strong fourth-quarter earnings season as an additional catalyst for stock value growth, led by the continued prominence of tech stocks and investor interest in artificial intelligence. Economic data such as the January payrolls report and the GDP report, showing strong labor market and annualized growth of 3.3% respectively, also contribute to the positive outlook.
Consumer spending holds up amid easing inflation
Consumer spending has remained robust despite the easing of inflation. The labor market has shown strength according to the January payrolls report, while the GDP report showed higher than expected annualized growth of 3.3%. Although prices for common goods have risen, the recent update to the consumer price index by the Labor Department indicates that the increase was less significant than initially reported.
Conclusion
UBS’s chief global wealth management officer is optimistic about the future of stock values, expecting further growth and a potential rise to around 5,300 for the S & P 500. The positive trend in stock values is supported by strong corporate earnings, economic data, and the possibility of a “Goldilocks” economic outcome. Although the base case predicts the S & P 500 to end the year at current levels, current economic conditions continue to support a brighter outlook.
Analyst comment
Positive
As an analyst, I predict that the stock market will continue to rise based on strong corporate earnings, positive economic data, and the potential for a “Goldilocks” economic outcome. The S&P 500 may reach around 5,300, a 5.6% increase from current levels, supported by consumer spending and easing inflation.
