2023-10-13 14:23:45 ET
UBS’s investment analysts believe that the U.S.’s economy is on track for a “softish” landing, with economic growth slowing in the upcoming months and stocks rising in the next year.
In their U.S. Equities report, published Friday, UBS said that equities’ risk-reward is more attractive over a 12-month period, when stocks would rebound once rates stabilized.
UBS said that the reason for the economic growth slowdown is the resumption of student loan repayments, the higher oil prices, and a tick up in mortgage rates, prompting a reduction in consumer spending.
In addition, geopolitical risks could present potential headwinds.
But when it comes to the S&P 500 ( NYSEARCA: SPY ), UBS analysts said they expect its profits to increase at a low single-digit pace, compared to a year ago, “driven by earnings beats of around 3%.”
“While lower inflation is weighing on revenue growth, many corporate costs are cooling at a faster pace, suggesting that profit margins should hold up,” the UBS report said. “We believe investors will be keenly interested in the durability of consumer spending.”
In addition, UBS has trimmed its June 2024 S&P 500 ( SPY ) price target from 4,700 to 4,500 because forward returns are now slower than normal, UBS analysts said.
Their preferred sectors are consumer staples ( XLP ), energy ( XLE ), and industrials ( XLI ), and their least preferred sectors are real estate ( XLRE ) and utilities ( XLU ).
More on SPDR S&P 500 ETF Trust:
- Depression Alert: Why The Shrinking Money Supply Spells Trouble For SPY
- SPY: An Early Contrarian Opportunity (Technical Analysis, Rating Upgrade)
- Something Will Break Soon
- Investors were sellers of fund assets for the third week in four
- G Squared Private Wealth: Fed pause should boost markets end-of-year ignoring geopolitical risks
For further details see:
A softish landing in the US economy will rise stocks next year - UBS