UBS analysts recently hiked their 2024-end price target for the S&P 500 to 5,150, implying a 7.7% upside from Friday’s closing price. The bullish move comes despite the stock market’s rocky start to the year amid increasing uncertainty over the Federal Reserve’s rate-cutting plans. 

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UBS is Now Among the Most Bullish Wall Street Firms 

UBS strategists led by Jonathan Golub have revised their year-end target for the S&P 500 to 5,150, up from the previous projection of 4,850. Last year, their outlook indicated favorable stock conditions, citing strong earnings, easing inflation, accommodative monetary policy, and an overall improved economic environment.

“Given the Fed’s recent pivot, subsequent decline in rate expectations, and above-trend 2024 [earnings per share] revisions, we now embrace this upside scenario as our base case.”

– analysts wrote in a note.

The forecast exceeds that of UBS’ wealth management unit, which recently hiked its target for the index to 5,000. 

Further optimism from the UBS strategists comes in the wake of equities’ bumpy start to the year. Concerns have emerged that investors, driven by overly optimistic expectations of Federal Reserve rate hikes, rushed into stocks too hastily. Yet, after Friday’s closing bell, the S&P 500 was just 0.27% away from its all-time high. 

UBS strategy team’s new index target suggests a 7.7% upside from its current value, as they also hiked their 2024-25 earnings per share (EPS) estimates to $225 from $235 and $246 to $250, respectively.

“Importantly, our growth estimates of 6.3% and 6.4% over the next 2 years are below the consensus of 11.4% and 12.8%. While earnings should drive 2024 returns, falling interest rates should support incrementally higher multiples.”

said Golub and his team. 

UBS now stands among the top on Wall Street’s 2024 predictions, aligning with Yardeni Research and Goldman Sachs, which have set targets of 5,400 and 5,100, respectively.

S&P 500 Upside Limited as Investors Worry About Delay in Policy Cut

Since the onset of 2024, the S&P 500 saw a moderate rise of 0.86%, closing at 4,783 on Friday. 

The market’s gains were largely led by the same Big Tech stocks that spearheaded its 2023 rally, but the upside remains limited due to macro challenges. 

Investors are concerned that Fed policymakers may delay the first interest rate cut after recent data showed an uptick in inflation in December. The consumer price index (CPI) rose 0.3% last month after climbing just 0.1% a month earlier.

The central bank seeks clearer confirmation that the inflation rate is headed toward its 2% goal before it begins reducing the policy rate, which currently sits in the 5.25%-5.5% range. 

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