UBS Boosts S&P 500 Year-End Target To 5,850, Fueled By Corporate Profits And Rate Cuts

UBS has reportedly hiked its year-end target for the S&P 500 to 5,850 points from a previous projection of 5,600, driven by rise in corporate profits, conducive macroeconomic backdrop and interest rate cuts.

"Rate cuts should lower interest expense and default risk, adding to both EPS (earnings-per-share) and valuations," UBS analysts led by Jonathan Golub said, according to a Reuters report.

Fed officials' commentaries in recent times have also indicated an inclination toward more easing in coming times. For instance, Federal Reserve Bank of Minneapolis President Neel Kashkari said on Monday that more rate cuts can be expected ahead with the 2% inflation target in sight.

"As of right now, it appears likely that further modest reductions in our policy rate will be appropriate in the coming quarters to achieve both sides of our mandate," Kashkari reportedly said in a speech.

UBS reportedly expects the central bank to reduce rates by 250 basis points through 2026 and noted that a sharp fall in interest rates could likely boost profit margins by 20 basis points.

On Tuesday, the S&P 500 fell from its record highs as earnings season gathered momentum. The index is up over 23% on a year-to-date basis.

The SPDR S&P 500 ETF Trust (SPY) was trading lower by nearly 0.08% while the Invesco QQQ Trust, Series 1 (QQQ) lost nearly 0.26% on Tuesday morning. Retail sentiment on Stocktwits dipped into the ‘bearish’ territory (42/100) from the ‘neutral’ zone a day ago.

Earlier, Goldman Sachs raised its index price target for the next twelve months to 6,300 from 6,000 while also increasing its 2024-end target to 6,000 from 5,600. The brokerage expects higher margin growth for firms as well as a steady macroeconomic outlook through 2025, the report said.

Also See: Citi Beats Q3 Estimates: CEO Fraser Says Bank On Track To Meet 2024 Expense, Revenue Targets

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