The US stock market is expected to continue rising despite high valuations, according to UBS analyst David Lefkowitz.
UBS analyst David Lefkowitz believes that the current market valuation is reasonable given the economic conditions. These conditions include declining inflation rates, anticipated interest rate cuts from the Federal Reserve, and strong earnings growth among companies.
The S&P 500 index is projected to reach 6,300 points by mid-2025 and potentially 6,600 points by the end of that year. Factors contributing to the recent performance of the S&P 500 include interest rate cuts, strong quarterly earnings reports, and a Republican majority in the elections.
UBS forecasts an eleven percent growth in earnings for 2024, followed by an additional eight percent increase in 2025. The stability of the labor market and consumer spending are expected to play a crucial role in sustaining economic growth. Investments in emerging technologies, particularly artificial intelligence, are seen as potential growth drivers.
UBS projects that further interest rate cuts by the Federal Reserve will stimulate consumer spending, business investment, and the construction industry. Historical data suggests that stock markets tend to rise during periods characterized by interest rate cuts and a soft landing.
The combination of earnings growth and high consumer spending is expected to create a positive environment for US equities. The ambitious price targets set by UBS for the S&P 500 reflect this positive assessment. Overall, the outlook for the US stock markets remains optimistic, supported by factors such as earnings growth, interest rate cuts, and a stable labor market.