UBS strategists foresee the S&P 500 maintaining its momentum and potentially reaching new heights.
Recently approaching 5,000 points, the index has surged over 5% in the past five weeks, setting records.
UBS reports, “Unexpectedly strong US growth and controlled inflation could lead the Federal Reserve to significantly lower interest rates.”
The robust US job market is a major driver behind the stock market’s success.
Defying recession fears, January’s job report showed an addition of 353,000 positions, keeping the unemployment rate at 3.7% for two years.
The last quarter showed the US GDP growing at a 3.3% annual rate, beating the 2% forecast.
UBS highlights that Americans now have, on average, $1,400 more in spending power than before the pandemic.
The Federal Reserve’s cautious stance on inflation may soon ease, with UBS suggesting inflation is moving toward the Fed’s 2% goal.
An upcoming report on February 13 will provide more details.
Earnings Exceed Expectations
FactSet data reveals that over 75% of S&P 500 companies have outperformed quarterly earnings predictions.
UBS predicts an 8% rise in earnings per share in 2024 and 6% in 2025, with AI-driven tech firms and small caps showing particular promise.
UBS predicts the US economy will achieve a soft landing, with the S&P 500’s year-end levels remaining steady.
Yet, recent data hint at the possibility of continued robust growth, modest inflation, and faster monetary easing.
In short, this could propel the S&P 500 to around 5,300 points by year’s end.