UBS Global Research has revised its year-end target for the S&P 500 index to 5,850 points, an increase from the previous forecast of 5,600 points. This adjustment is due to expected growth in corporate earnings, a favorable macroeconomic environment, and recent interest rate cuts.

Analysts, led by Jonathan Golub, believe that the rate cuts implemented by the Federal Reserve will have a positive impact on earnings per share (EPS) and valuations by reducing interest costs and default risk. They also note that improved financial conditions indicate reduced stress and increased liquidity, which is beneficial for market valuations.

UBS has also raised its year-end target for the S&P 500 in 2025 to 6,400 points, citing potential strength in technology stocks as a contributing factor. The Federal Reserve has initiated a series of rate cuts to maintain low unemployment and ease inflation, with UBS anticipating a total reduction of 250 basis points by 2026, potentially leading to a 20 basis point increase in profit margins.