On Tuesday Eastern Time, UBS released a report stating that as the risk of an economic recession in the United States narrows, US corporate earnings growth exceeds expectations, prompting the bank to once again raise its year-end target for the S&P 500 index.
The institution currently predicts that by the end of 2024, the benchmark index will reach 5600 points (previously 5400 points), which means an additional 5.6% increase from the current level of around 5300 points.
UBS has full confidence in the outlook of the US stock market
In February of this year, UBS had already raised its target level for the S&P 500 index once, and this further increase indicates UBS's strong confidence in the outlook for the US stock market.
The analyst team led by Jonathan Golub of UBS wrote in a report, "Since then (February this year), the general forecast for US GDP in 2024 has increased from 1.6% to 2.4%. At the same time, based on a series of key indicators such as economist surveys and the Chicago Federal Reserve's financial condition index, the risk of a US recession/tail has decreased."
UBS's 5600 point forecast is ahead of estimates from other Wall Street institutions. Currently, Wall Street's median expected target for the S&P 500 index is 5300 points.
The impressive performance of the financial reporting season stimulates bullish sentiment
Most importantly, the strong performance of the US stock market earnings season has stimulated more bullish sentiment. Because in the first quarter of this year, the financial performance of most US stock companies greatly exceeded expectations.
UBS stated that although the market generally expects earnings per share to increase by 4.1%, in reality, earnings per share increased by 10.6% for the quarter. Meanwhile, strong expectations from US stock companies for the second quarter indicate that the market will further rise.
UBS has raised its earnings per share forecast for US companies from $240 this year to $245, and has raised its earnings per share forecast for 2025 from $255 to $260.
Despite the optimistic attitude of the bank, there are voices on Wall Street who are singing short. Some analysts are still concerned that an economic recession may hit the US economy and lead to a decline in the stock market. For example, analyst Gary Schilling believes that given the economic consequences of a weak labor market, the US stock market may fall by 30%.