UBS has significantly raised its forecast for the S&P 500, projecting the benchmark index will reach 6,400 by June 2026, underpinned by strong corporate earnings, ongoing AI investments, and a more positive macroeconomic outlook.

The Swiss investment bank also increased its year-end 2025 target to 6,000, up from a prior estimate of 5,800. The upgrade is based on revised earnings projections, with expected earnings per share (EPS) of $260 for 2025 and $280 for 2026-up from previous estimates of $250 and $275, respectively.

Near-Term Neutrality, Long-Term Optimism

Despite the bullish long-term forecast, UBS recently shifted its stance on U.S. equities from Attractive to Neutral. The change follows a strong rally in equity prices and reduced near-term upside potential, particularly with the S&P 500’s forward price-to-earnings ratio now above 21x-suggesting investors have already priced in a significant easing in trade tensions.

Nonetheless, UBS maintains confidence in the broader trajectory for equities. The June 2026 forecast implies an approximate 8% upside from the S&P 500’s current level of 5,940 (as of May 20).

“We still believe the bull market is intact and stocks can continue to move higher over the coming year,” wrote David Lefkowitz and the UBS strategy team.

Macro Tailwinds and Sector Highlights

UBS’s base-case scenario is built on expectations of real wage growth, clearer tax policy, potential rate cuts, and ongoing deregulation. Despite risks from elevated tariffs and possible trade disputes, the bank expects improving economic conditions in the second half of 2025 to support further equity gains.

In terms of sector preferences, Information Technology remains a top pick, driven by robust spending in artificial intelligence infrastructure and constrained supply chains. Companies like Meta (NASDAQ:META) and Microsoft (NASDAQ:MSFT) are seen as key beneficiaries thanks to their aggressive capital investment strategies.

Communication Services also earned a positive outlook, particularly internet platforms leveraging AI to enhance profitability. UBS additionally sees Healthcare as well-positioned due to compelling valuations and earnings potential, while Utilities are favored for their defensive nature and exposure to surging AI-driven power demand.

Wide Range of Outcomes Possible

While UBS is confident in the bull market’s durability, it outlines a range of possible market trajectories:

• Bullish case: S&P 500 could hit 6,700 by December 2025 if trade tensions ease significantly and AI productivity gains surpass expectations.
• Bearish case: A hard economic landing could pull the index down to 4,500.

In conclusion, while near-term caution is warranted, UBS believes the broader investment environment supports higher equity prices over time. “The risk-reward for U.S. stocks looks more balanced in the short term, but the longer-term setup remains constructive,” the bank concluded.

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