UBS predicts that U.S. equities will continue to grow due to strong earnings, favorable economic conditions, and expected rate cuts by the Federal Reserve.

They project that the S&P 500 will reach 6,300 by June 2025 and 6,600 by December 2025, with a forecast of 9% earnings per share growth for 2024 and 2025.

UBS is optimistic based on robust third-quarter results, increased vacation spending, and a healthy job market.

They anticipate further rate cuts from the Federal Reserve, which could boost consumer spending, corporate borrowing, and real estate activity.

Despite recent inflationary pressures, the current economic landscape is seen as conducive to a "soft landing" without a sharp downturn.

UBS also highlights the significant growth potential of artificial intelligence, with strong demand for AI applications across various sectors.

While acknowledging high valuations, UBS believes they are justified given the Fed's easing cycle and a positive earnings outlook.

Historical data shows that equities have typically risen by an average of 18% in the year following the start of a Fed easing cycle, reinforcing the positive sentiment towards U.S. stocks.