Talk of an overheated U.S. stock market may be premature, at least according to a new outlook from UBS. The bank believes the current equity cycle still has unfinished business, with conditions lining up for U.S. stocks to keep climbing beyond the near term and into 2026.
Instead of pointing to speculative behavior, UBS argues that the market’s strength rests on something more durable: company profits. In its assessment, share prices have risen largely in step with earnings, avoiding the kind of valuation excess that has ended previous bull runs abruptly.
Key Takeaways
UBS believes U.S. equities still have room to rise into 2026, driven primarily by earnings growth rather than speculation.
Easing monetary policy and reduced uncertainty around trade and regulation are seen as key tailwinds for stocks.
Wall Street remains divided, with forecasts for the S&P 500 in 2026 ranging widely despite record-high levels today.
A profit-led market, not a speculative one
UBS sees corporate America entering the next phase of the cycle on solid footing. Earnings across the S&P 500 are expected to grow at a healthy pace through 2026, driven in large part by dominant technology firms that continue to deliver strong cash flows.
If those profit trends hold, UBS believes equity prices can move higher without relying on multiple expansion. Under that scenario, the bank estimates the S&P 500 could approach the 7,700 zone by the end of 2026, with earnings growth doing most of the work rather than investor exuberance.
Rates, leadership, and a friendlier policy backdrop
Another pillar of UBS’s outlook is the evolving monetary environment. The bank expects the Federal Reserve to continue easing policy as inflation pressures fade, keeping financial conditions supportive for risk assets well into next year.
UBS also sees potential for a more accommodative tone following changes at the Fed’s leadership level, which could further reinforce investor confidence. Lower borrowing costs and improved liquidity, in the bank’s view, remain powerful tailwinds for equities as long as growth avoids a sharp slowdown.
Beyond rates and earnings, UBS highlights a quieter but important shift: reduced uncertainty. As legal and regulatory questions around trade policy and tariffs move closer to resolution, companies gain clearer visibility for planning and investment. Even if the economic impact proves temporary, UBS argues that clarity alone can lift sentiment and support valuations.
Wall Street sees the same road, but at different speeds
While UBS remains firmly constructive, it is far from the only major institution projecting higher levels for U.S. stocks. That said, expectations vary widely. Bank of America takes a more cautious stance, warning that valuations and heavy reliance on mega-cap tech could limit upside, with its forecast placing the index closer to 7,100.
On the more optimistic side, JPMorgan expects the S&P 500 to reach around 7,500, with upside potential if rate cuts accelerate. Goldman Sachs targets roughly 7,600, while Morgan Stanley sees room for an even stronger move toward 7,800.
For UBS, however, the debate comes down to fundamentals. As long as earnings growth remains intact, policy conditions stay supportive, and uncertainty continues to fade, the bank believes the U.S. equity market has the structural support needed to extend its advance well into 2026 – even if the path there includes occasional pauses.
