UBS analysts see a constructive outlook for the inventory market within the United States. Although the Nasdaq fell 0.6% and the S&P 500 fell 0.3% this week, UBS believes that the US economic system and attainable rate of interest cuts will drive this progress.
Optimism Based on Solid Fundamentals
UBS maintains a constructive view attributable to robust financial fundamentals. “Solid fundamentals point to greater potential in the stock market,” the financial institution stated, highlighting the nice state of the economic system and the attainable discount of charges by the Federal Reserve.
Economic Growth Driven by Consumption
In the third quarter, US GDP posted annualized progress of two.8%, pushed primarily by client spending, which grew 3.7%, in response to UBS.
Consumption of products had a notable enhance of 6%, whereas spending on companies grew by 2.6%. Additionally, the ADP employment report confirmed strong progress within the labor market, with 233,000 new jobs in October, exceeding the expectation of 111,000 jobs.
Stable Growth Reduces Recession Risk
Reviews from the Bureau of Economic Analysis (BEA) present that the US economic system has grown at an annual common of two.5% over the previous 5 years. This suggests a strong progress base that UBS analysts say decreases the chance of a recession within the close to time period.
Reduction in Demand Interest Rates
Inflation has moderated, and UBS anticipates that the Federal Reserve will proceed to cut back charges. During the third quarter, the non-public consumption expenditure (PCE) index inflation price fell to 1.5% from 2.5% within the earlier quarter, whereas core inflation (core PCE) stood at 2.2%.
“We expect rate cuts of 50 basis points this year and an additional 100 basis points in 2025,” UBS famous, noting that related cuts previously, in non-recession intervals, have benefited the inventory market.
AI as a Growth Factor for the Market
UBS highlights the position of synthetic intelligence (AI) as an engine of progress. Tech corporations equivalent to Microsoft, Meta and Alphabet have reported robust progress in AI and cloud, suggesting progress potential within the sector, regardless of excessive capital prices.
The agency is optimistic about semiconductor shares linked to AI and giant know-how corporations. With a attainable rate of interest lower and AI as a catalyst, UBS maintains a constructive outlook and units a goal of 6,600 factors for the S&P 500 by the tip of 2025.
