UBS sees S&P 500 at 7,700 by December 2026 as backdrop remains supportive
#S&P 500 #UBS #Earnings Growth #AI Investment #Fed Rate Cuts #Market Outlook #Technology Sector #Bull Market
📌 Key Takeaways
- UBS projects S&P 500 to reach 7,700 by December 2026
- Earnings growth expected at 11% in 2025 and 12% in 2026
- Earnings growth broadening beyond the Magnificent 7
- UBS downgraded Technology and Communication Services sectors to Neutral
- UBS expects two additional Fed rate cuts this year
📖 Full Retelling
UBS, the Swiss investment bank, projected the S&P 500 index to reach 7,700 by December 2026 in the U.S. stock market on February 20, 2026, citing 'good profit growth, supportive Fed policy, and the rollout of AI' as key drivers for maintaining an 'Attractive' view on U.S. equities. UBS strategists, led by David Lefkowitz, expect earnings momentum to remain firm, forecasting S&P 500 earnings per share (EPS) of $277 in 2025 and $310 in 2026, representing growth of 11% and 12%, respectively. The bank noted that while fourth-quarter results are currently tracking toward roughly 14% year-over-year growth, the magnitude of earnings beats has moderated and guidance has been 'a touch cooler than in recent quarters but still encouraging.' The market's internal divergences reflect shifting leadership within the bull cycle, with earnings growth broadening beyond the so-called Magnificent 7, which accounted for nearly two-thirds of earnings growth in 2025 but is expected to contribute about 50% this year. Despite the positive outlook, UBS strategists flagged concerns about AI data-center capital spending growth, which is poised to decelerate after surging more than fourfold over the past three years. They noted that the scale of investment now consumes nearly all hyperscalers' operating cash flow and warned that aggressive spending may not fully translate into attractive returns on capital. As a result, the bank downgraded the Information Technology and Communication Services sectors to Neutral, though they stressed that 'current trends remain supportive and we are not anticipating downside risks in the near term.' Looking ahead, UBS expects two additional 25-basis-point Federal Reserve rate cuts this year and pointed to historical performance when the Fed is easing and the economy avoids recession, equities have historically outperformed.
🏷️ Themes
Stock Market Forecast, Economic Outlook, Sector Analysis, Monetary Policy
📚 Related People & Topics
UBS
Multinational investment bank headquartered in Switzerland
UBS Group AG (stylized simply as UBS) is a Swiss multinational investment bank and financial services firm founded and based in Switzerland, with headquarters in both Zurich and Basel. It holds a strong foothold in all major financial centres as the largest Swiss banking institution and the world's ...
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Deep Analysis
Why It Matters
UBS's bullish forecast for the S&P 500 signals confidence in U.S. equities, highlighting profit growth, supportive Fed policy, and AI rollout as key drivers. The projection to 7,700 by December 2026 may influence investment decisions and market sentiment.
Context & Background
- UBS maintains an attractive view on U.S. equities citing profit growth, Fed policy, and AI rollout
- The bank expects earnings momentum to remain firm with EPS growth of 11 percent in 2025 and 12 percent in 2026
- UBS anticipates two 25-basis-point Fed rate cuts this year and downgrades IT and Communication Services to Neutral
What Happens Next
Investors may adjust portfolios in anticipation of the projected rally, while companies could face pressure to justify continued capital spending. The market will monitor Fed policy moves and AI sector performance for potential shifts.
Frequently Asked Questions
What is UBS's target for the S&P 500 in December 2026?
7,700
How many Fed rate cuts does UBS expect this year?
Two 25-basis-point cuts
Which sectors did UBS downgrade to Neutral?
Information Technology and Communication Services
Original Source
try{ var _=i o; . if(!_||_&&typeof _==="object"&&_.expiry Gold prices tick up amid US-Iran tensions, Fed caution; set for weekly loss Private credit jitters; U.S. PCE, GDP data ahead - what’s moving markets Nvidia and OpenAI close to finalizing smaller, $30 bln investment- FT U.S. stocks end lower after hawkish Fed minutes; Walmart guidance falls short (South Africa Philippines Nigeria) UBS sees S&P 500 at 7,700 by December 2026 as backdrop remains supportive By Vahid Karaahmetovic Author Vahid Karaahmetovic Stock Markets Published 02/20/2026, 05:05 AM UBS sees S&P 500 at 7,700 by December 2026 as backdrop remains supportive 0 US500 -0.28% Investing.com -- UBS believes the backdrop for U.S. stocks remains favorable, projecting the S&P 500 index to reach 7,700 by December 2026. The bank maintained an Attractive view on U.S. equities, citing “good profit growth, supportive Fed policy, and the rollout of AI” as key drivers. It set an interim S&P 500 target of 7,300 for June 2026, alongside its year-end 2026 forecast of 7,700. Track the latest S&P 500 forecasts with InvestingPro UBS strategists expect earnings momentum to remain firm, forecasting S&P 500 EPS of $277 in 2025 and $310 in 2026, representing growth of 11% and 12%, respectively. Fourth-quarter results are currently tracking toward roughly 14% year-over-year growth, though the magnitude of earnings beats has moderated and guidance has been “a touch cooler than in recent quarters but still encouraging,” strategists led by David Lefkowitz said. The market’s internal divergences reflect shifting leadership within the bull cycle, they said. While large-cap tech has driven gains in recent years, earnings growth is now broadening beyond the so-called Magnificent 7. The group accounted for nearly two-thirds of earnings growth in 2025 but is expected to contribute about 50% this year. The strategists also flagged that AI data-center capital spending growth is poised to decelerate after surging more than fourfold over...
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