UBS names three catalysts for continued stock market growth in 2026

UBS analysts named three main factors, which, in their opinion, will ensure the continued growth of the U.S. stock market in 2026. According to the largest Swiss bank, investors should not attach much importance to what will happen in the last trading days of 2025 and look beyond the short-term dynamics.

Analysts at UBS advised investors to focus on key factors that could set the stock market's momentum in early 2026, including corporate earnings growth, a change in Federal Reserve leadership, and a U.S. Supreme Court decision on the legality of duties imposed by President Donald Trump. This decision will probably support economic growth and inflation dynamics, MarketWatch notes.

These 2026 factors are more important than the limited potential for a rally in late 2025, according to Ulrike Hoffmann-Burhardi, chief investment officer of wealth management and global head of equities at UBS Wealth Management. UBS has set a 2026 year-end target for the S&P 500 at 7,700 points. This implies a rise in the index of just over 10% relative to current levels.

The main driver for the market next year, according to Hoffman-Burkhardy, will be an increase in corporate profits. Throughout 2025, companies have generally outperformed financial performance expectations, with much of the investor optimism coming from the technology sector. Price-to-earnings (P/E) ratios remain only slightly above early 2025 levels: this, UBS notes, indicates that market growth has been driven primarily by earnings growth rather than inflated valuations.

UBS also believes that the announcement of a new Fed chair could encourage a softer monetary policy path. Three key candidates - Kevin Warsh, Kevin Hassett and Christopher Waller - have repeatedly spoken in favor of further rate cuts, despite the third consecutive rate cut in December. With unemployment rising to a four-year high and inflation slowing, the regulator has plenty of room to support economic growth. Historically, the Fed's policy easing outside of recessionary periods has been a powerful favorable factor for the stock market, the bank said.

- The third factor of index growth may be the decision of the U.S. Supreme Court in January or February 2026 on the legality of duties imposed by President Donald Trump. The baseline scenario assumes their abolition. However, analysts consider it unlikely that a more lenient trade regime will be maintained: the Trump administration has already declared its readiness to quickly restore trade barriers using alternative legal mechanisms and new duties. Against this background, the court ruling is expected to increase volatility and fluctuations in market sentiment rather than become the basis for sustainable growth in quotations, UBS believes. Therefore, it considers it important to diversify investment portfolios and maintain gold shares.

Overall, UBS advises "positioning for continued stock market growth," including sectors such as technology, health care, utilities and financials. Outside of the U.S., the bank highlights China's technology sector, as well as the Chinese and Japanese equity markets in general. UBS also sees opportunities in banking, utilities, industrials and technology amid an expected recovery in European economic growth. And amid the weakening attractiveness of the U.S. dollar and its likely continued weakness in the first half of 2026, investors are advised to review the currency structure of portfolios and ensure sufficient diversification for the coming year, UBS said.

This article was AI-translated and verified by a human editor