UBS has raised its S&P 500 price target for the end of 2025. Here's why

UBS analysts have significantly raised their S&P 500 earnings per share estimates to $265 for 2025 (6% growth) and $285 for 2026 (7.5% growth), while also increasing S&P 500 price targets to 6,200 by end-2025 and 6,500 by June 2026. This upward revision is driven by expectations of de-escalating trade tensions, resilient second-quarter corporate earnings, and a forthcoming beneficial tax-and-spending package. However, UBS cautions on potential near-term volatility due to the impending expiration of U.S. tariffs, which could lead to economic growth slowdowns or increased inflation, highlighting management commentary during the upcoming Q2 earnings season as crucial.

Analysis

UBS analysts have adopted a cautiously optimistic stance on U.S. equities, raising their S&P 500 earnings per share estimates to $265 for 2025 and $285 for 2026, which imply growth of 6% and 7.5% respectively. This forecast is underpinned by expectations of a resilient second-quarter earnings season, a boost to corporate cash flows from a forthcoming tax-and-spending package, and a market that is pricing in a de-escalation of trade and geopolitical tensions. Consequently, UBS has lifted its S&P 500 index targets to 6,200 for year-end 2025 and 6,500 for June 2026. However, despite this constructive medium-term outlook and the market's recovery from the tariff-induced sell-off earlier in the year, the firm maintains a "neutral" view, flagging significant near-term risks. The primary concern is the potential for volatility surrounding U.S. trade policy, as a crucial tariff delay is set to expire next month. The analysts warn that the arrival of previously tariffed goods on store shelves could trigger a slowdown in economic growth and an uptick in inflation through the summer, making management commentary during the upcoming Q2 earnings season a critical catalyst for market direction.

Key Decisions for Investors

• While UBS's medium-term S&P 500 targets of 6,200-6,500 are constructive, investors should prepare for near-term volatility related to the upcoming tariff deadline and its potential impact on inflation and growth.
• Closely monitor management commentary and guidance during the mid-July Q2 earnings season, as this will provide the first clear signal of how companies are navigating tariffs and their outlook for the second half of the year.
• Consider aligning sector exposure with UBS's preferred areas, which include communication services, financials, health care, information technology, and utilities, as these are viewed as better positioned to weather potential economic headwinds.