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The S&P 500 (SPX) has defied expectations in 2025, surging past record highs and positioning itself for what analysts are calling a potential summer rally. After navigating through tariff uncertainties, geopolitical tensions, and Federal Reserve policy shifts, the benchmark index is now tracking above average for a post-election year with approximately 4% gains at the halfway mark.

Recent developments in trade negotiations, coupled with easing tensions and optimistic earnings forecasts, have created a surprisingly bullish environment that has caught many investors off guard.

S&P 500 Outlook: UBS Raises Forecast Amid Trade Optimism

UBS Global Wealth Management has raised its year-end target for the S&P 500 to 6,200 from its previous forecast of 6,000, representing about 1% upside from current levels.

The revised outlook is based on softening trade tensions and expectations of resilient quarterly earnings, with the firm maintaining its neutral stance on U.S. equities. Major brokerages, including Citigroup and Barclays have also lifted their targets for the index earlier this month, reflecting growing confidence in the market’s trajectory.

The wealth management unit emphasized that large-cap companies should weather tariff impacts reasonably well, supporting their more optimistic view. UBS has also raised the index’s annual earnings-per-share estimate to $265 from $260, anticipating another resilient Q2 earnings season. Additionally, the firm increased its 2026 mid-year target to 6,500 and lifted the EPS forecast to $285, suggesting sustained growth momentum beyond the current year.

Trade negotiations have played a crucial role in this revised outlook, with President Trump’s administration reducing some tariff rates on certain countries including China after initially imposing reciprocal tariffs in April. UBS notes that growth and inflation should start to improve later this year once the economy adjusts to the one-time impact of the tariffs, providing a foundation for continued market gains.

Technical Setup Points to Spring-Summer Rally Potential

The S&P 500’s remarkable recovery from its April lows has created compelling technical conditions that support bullish sentiment. The index has gained more than 22% since its April low, with the rebound being so abrupt that investors who sold during the uncertainty have already missed significant gains. The momentum has been driven by a series of tariff negotiations, deescalations, and peace talks between Israel and Iran brokered by President Trump, with markets reflecting optimism about potential trade deals before the July 9 deadline.

Veteran economist David Rosenberg, typically known for his bearish stance, has acknowledged that the technical setup has improved considerably in recent weeks, supporting a “spring-summer rally.” He notes that while the rally cannot be described as fundamentally driven, the technical picture has improved as gaps get filled with ease and cumulative daily advance-decline lines for both the NYSE and S&P 500 make fresh all-time highs. This technical strength, combined with improving breadth indicators, suggests the current rally has solid underlying support.

Contributing factors include a weakening U.S. dollar, which according to UBS’s Ulrike Homann-Burchardi will persist in the second half as U.S. growth moderates and the Fed eventually cuts rates. This backdrop serves as a tailwind for tech stocks, as overseas sales account for over 50% of U.S. tech companies’ revenue, meaning profits earned abroad translate into direct bottom-line boosts. Historical data also supports current optimism, showing that buying stocks at all-time highs can generate slightly better returns versus buying at any other time.

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