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The S&P 500 will rise another 6% by the end of the year as the risk of recession declines, says UBS
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UBS raised its price target for the S&P 500 to 5,600 from 5,400, marking the highest target on Wall Street.
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The new estimate arises from the reduced risk of recession and strong profit growth.
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UBS also raised its earnings per share growth estimate for 2024 and 2025.
Reduced recession risks and earnings growth that exceeded estimates led UBS to once again raise its S&P 500 target for the end of the year, the bank said in a note on Tuesday.
It now expects the benchmark index to reach 5,600 by the end of 2024, implying a 5.6% increase from current levels of 5,300.
Although UBS updated its S&P target so recently in FebruaryRecent economic data has made the 5,400 forecast for that month seem too weak.
“Since then, consensus GDP forecasts for 2024 have risen from 1.6% to 2.4%,” wrote analysts led by Jonathan Golub. “At the same time, recession/tail risks have declined across a number of key metrics, including surveys of economists and the Chicago Fed’s Index of Financial Conditions.”
The UBS projection of 5,600 leads other Wall Street estimates, for which the median is 5,300.
Additionally, the strength of first-quarter earnings spurred further optimism as most companies substantially beat projections. While consensus called for EPS growth of 4.1%, EPS growth rose 10.6% in the quarter, UBS said, and robust second-quarter estimates point to further upside for the market.
UBS raised earnings per share forecasts to $245 from $240 this year and raised 2025 estimates to $260 from $255.
Despite the bank’s optimism, some analysts still fear that a recession could hit the US economy and cause stocks to fall.
Forecaster Gary Schilling told Business Insider that shares could fall by up to 30% given that weakness in the labor market can trigger economic consequences.
Read the original article at Business Insider