- U.S. stock futures are modestly higher after a strong rally on January 15.
- UBS projects 9% earnings growth for S&P 500 in 2025, with AI-driven tech stocks leading.
- Despite potential headwinds, UBS remains bullish on large-cap stocks and earnings growth.
U.S. stock futures are trading higher on January 16, buoyed by a strong rally in the previous session. The Nasdaq 100, Dow Jones, and S&P 500 saw significant gains, driven by a lower-than-expected Consumer Price Index (CPI) report for December.
UBS remains optimistic about U.S. equities, projecting a 9% earnings growth for the S&P 500 in 2025. Despite challenges such as high equity market valuations and a stronger U.S. dollar, UBS believes solid earnings growth will drive the market.
UBS Bullish on U.S. Equities Amid Robust Earnings and Economic Growth
The stock market is experiencing upward momentum as futures trade higher after a notable rally on January 15. A lower-than-expected December CPI report has raised hopes for a less aggressive Federal Reserve, while strong earnings reports from major banks have boosted investor optimism. The Dow, S&P 500, and Nasdaq Composite all posted impressive gains, and the 10-year U.S. Treasury yield fell sharply, further supporting market sentiment.
UBS strategists have reaffirmed their positive outlook for U.S. equities in 2025, with expectations for a 9% increase in S&P 500 earnings. The strong earnings growth is underpinned by a recovering labor market and healthy economic conditions. UBS anticipates that mega-cap technology stocks, particularly those involved in AI infrastructure, will play a crucial role in driving market performance.
While UBS remains confident in the market’s outlook, potential challenges such as a stronger U.S. dollar and geopolitical risks like tariff concerns could present headwinds. However, UBS believes that these issues will not derail the positive trajectory for stocks, as earnings growth remains the key driver. The bank’s forecast for the S&P 500 remains optimistic, with a year-end target of 6,600.
UBS sees value in large-cap stocks and has a favorable view of Information Technology, Communication Services, and Consumer Discretionary sectors. Their investment strategy includes a balance of growth and value stocks, with a particular focus on those with exposure to AI trends. Despite high valuations, UBS believes the macroeconomic environment justifies current stock prices, and solid earnings will provide a tailwind for continued gains.
The outlook for U.S. equities remains positive, with strong earnings growth and favorable macroeconomic conditions supporting market optimism. Despite potential challenges, the focus on earnings and AI-driven sectors positions the market for continued growth in 2025.
“Profit growth is more important for stocks over the next 12 months and should be a key tailwind for stocks in 2025.”
