Environment still supportive for stocks, says UBS

While U.S. markets may experience volatility ahead of the upcoming Federal Reserve meetings and the presidential election, stock market conditions could support further gains.

David Lefkowitz, head of U.S. equities at UBS Global Wealth Management, said factors such as solid earnings growth, improving inflation, interest rate cuts by the Federal Reserve and investments in artificial intelligence are creating a favorable environment for stocks.

“Overall, we believe the environment remains constructive for U.S. equities. Earnings growth is broadening, and second-quarter results give us confidence in our view of 11% growth in S&P 500 earnings per share (to $250) this year. We continue to expect an additional 8% increase (to $270) in 2025,” Lefkowitz wrote in a note.

“Historically, when the Fed cuts rates in the context of a soft landing, stocks tend to perform well in the 12 months leading up to and following the first Fed rate cut. Overall, we believe the backdrop remains favorable for U.S. stocks and investors should be fully allocated to the asset class,” Lefkowitz said.