According to UBS, the volatility in the markets is expected to continue amidst incoming economic data and uncertainty surrounding President-elect Donald Trump’s policies. Despite the recent pullback in stocks, UBS views this as a buying opportunity, as the strong economy is likely to support corporate earnings growth.
UBS analysts anticipate ongoing stock volatility in the coming weeks and months as investors react to data and policy news. The recent market pullback has been attributed to stronger economic data and rising Treasury yields, but the underlying trends remain favorable for equities.
The recent payrolls report for December highlighted a significant increase in job numbers and a decrease in the unemployment rate, indicating strength in the economy. UBS believes that the recent dips in equities present a buying opportunity, as the robust economic conditions are expected to drive corporate earnings growth.
With high equity valuations reflecting positive economic conditions, UBS sees recent stock pullbacks as a chance to invest. They expect a 9% profit growth for S&P 500 companies this year, supported by resilient economic activity.
Concerns about a prolonged Federal Reserve pause have been alleviated by data showing a slowdown in core CPI inflation, likely allowing for rate adjustments later in the year. UBS anticipates further improvement in AI monetization, which could fuel a rally in quality AI stocks and sustain the bull market in equities.
Despite potential volatility on the journey to UBS’s year-end target of 6,600 for the S&P 500, they remain confident that the equity bull market will endure.