Investing.com – Markets could be volatile this week, UBS analysts said on Monday, although they said the current environment is “favorable” for U.S. stocks, particularly due to strong investment in artificial intelligence.
Analysts said in a note to clients that shares could be impacted by the Federal Reserve’s upcoming policy decision on Wednesday, as well as fresh U.S. jobs data and earnings reports that make up 30% of the benchmark index’s market capitalization.
But they said the stock should remain bolstered by recent news that Meta Platforms (NASDAQ:), parent of Facebook (NASDAQ:), Alphabet (NASDAQ:), owner of Google (NASDAQ:), and software giant Microsoft (NASDAQ: 🙂 plan to increase capital expenditures in an attempt to protect themselves. their position in the race to develop and ultimately monetize so-called generative AI.
“[W]We remain constructive on US equities and expect AI-related companies to deliver strong earnings growth in the coming years,” UBS analysts said. “We believe it is critical for investors to maintain a healthy strategic allocation to technology stocks, but also advocate for diversified exposure across regions and industries.”
Meanwhile, analysts believe “largely strong and intact” corporate fundamentals will provide further support, citing the fact that more than half of S&P 500 companies reported quarterly profits and about three-quarters of them beat revenue estimates.
Inflation, which has been rising stubbornly in recent weeks, is also expected to begin to slow again, they said, adding that this could lead to a turn in the Federal Reserve’s contractionary monetary policy “later this year.”
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