U.S. equities are expected to continue to rise due to factors such as strong earnings growth, a resilient economy, anticipated Federal Reserve rate cuts, and significant investments in artificial intelligence.

UBS projects that the S&P 500 will reach 6,300 by June 2025 and 6,600 by December 2025, driven by a forecasted 9% earnings per share growth for both 2024 and 2025.

Recent positive third-quarter earnings, holiday spending trends, and a supportive labor market have increased confidence in U.S. stocks. UBS anticipates further rate cuts by the Federal Reserve, which could stimulate consumer spending, corporate borrowing, and housing activity, despite ongoing inflationary pressures.

The current macroeconomic environment is seen as favorable, avoiding a sharp economic downturn. The ongoing boom in artificial intelligence is seen as a key factor for optimism, with companies increasing their investments in technology and a sustained demand for AI applications.

UBS acknowledges that valuations are high but believes they are justified given the Federal Reserve's easing cycle and a positive earnings outlook. Historically, equities have experienced an average increase of 18% in the year following the start of a Federal Reserve easing cycle, reinforcing the positive sentiment surrounding the market.