UBS shares its MSCI ACWI outlook for the rest of the year

UBS forecasts the MSCI All-Country World Equity Index (ACWI) to reach 1,150 by December 2025, driven by positive economic growth, robust earnings, and prospective central bank rate cuts. While maintaining a near-term neutral stance, the bank advises leveraging volatility to build positions in structural growth themes such as AI. UBS highlights potential risks including growth/inflation disappointment and geopolitical tensions, yet also outlines a bull case supported by ample liquidity and surging AI investment.

Analysis

UBS presents a constructive long-term outlook for global equities, forecasting the MSCI All-Country World Equity Index (ACWI) will reach 1,150 by December 2025, up from its August 20 level of 1,129. This base case is underpinned by expectations of positive economic growth, robust corporate earnings—with forecasts upgraded to mid-to-high single digits for 2025 and 2026—and prospective central bank rate cuts. Despite this optimism, UBS maintains a 'Neutral' stance on global equities in the short term, citing a lack of immediate catalysts after a period of strong performance. The bank advises that periods of volatility should be treated as opportunities to build positions in structural growth themes it calls “Transformational Innovation Opportunities (TRIOs),” namely Artificial Intelligence, Power and resources, and Longevity. Geographically, the firm favors Technology globally, with additional support anticipated for U.S. financials, European industrials, and Indian equities. UBS also outlines a clear risk spectrum: a bull case scenario could see the ACWI reach 1,300 by June 2026 driven by ample liquidity and AI investment, while a downside scenario, triggered by tariffs or geopolitical tensions, could drag the index to 820.

Key Decisions for Investors

• Given UBS's constructive base case, investors may consider maintaining a long-term overweight position in global equities, anticipating that earnings growth will be the primary driver of returns over the next 12-18 months.
• Heeding the short-term 'Neutral' rating, it would be prudent to utilize market volatility and pullbacks as strategic opportunities to accumulate positions in favored structural growth areas like AI and Power.
• Investors should consider tilting portfolios towards UBS's preferred sectors, which include global Technology, U.S. financials, and European industrials, while also evaluating exposure to Indian equities for Asian market allocation.
• Monitor key risk factors such as unexpected inflation data, new tariff implementations, and geopolitical escalations, as these are the primary triggers identified by UBS that could shift the market from its base case to its bear case scenario of a significant downturn.