UBS’s U.S. equities CIO believes earnings will improve for the S&P 500, providing a 5,500-point growth scenario for the main index this year.
Analysts expect S&P 500 companies to grow 7% to 9% in the first quarter and say that growth is starting to lag behind the Magnificent Seven. Non-magnesium 7 stocks are expected to post positive growth for the first time since the fourth quarter of 2022. Additionally, analysts see this trend accelerating throughout the rest of the year.
The company maintains EPS estimates for the S&P 500 at 245, representing 9% annualized growth in 2024, and 260, representing 6% annualized growth in 2025.
While they warn the stock may be taking a breather given strong gains over the past six months, the company remains optimistic due to strong earnings growth, an expected Fed rate cut and increased investment in artificial intelligence.
“In our base case, we expect the S&P 500 to end the year at 5,200. But if inflation improves faster or earnings come in better than expected, our growth scenario of 5,500 seems reasonable,” they wrote.