UBS says S&P 500 returns in 2025 likely to be ‘backloaded’

Investing.com — UBS strategists see the S&P 500 index ending the 2025 year at around 6,400. This would mark an approximate 9% increase from the current levels, with returns “being backloaded,” the bank said in a note.

“After a rally this year through Trump’s cabinet appointments, we see mild downside in equities in H1 next year amid a step down in US growth,” strategists led by Arend Kapteyn noted.

The firm expects that once earnings estimates are adjusted to more realistic figures, the second half of 2025 should present a more favorable environment for equity markets.

The analysis by UBS indicates that despite the potential for a few months of underperformance by US stocks, they are expected to outperform European equities over a 12-month span. Meanwhile, European stocks are forecasted to perform better than those in emerging markets (EMs).

Style-wise, UBS predicts that Quality stocks will continue to outperform Value stocks, with US anticipated to exhibit strong performance.

Within EMs, the bank identifies Chinese internet companies as their top pick. However, the firm advises caution regarding the gains in trades related to China beneficiaries in other areas.

From a macro perspective, strategists note that while the global economy shows signs of improvement—such as easing inflation and interest rate pressures, rising real incomes at their fastest pace in two decades, and early signs of a housing market recovery—a growth slowdown is expected.

Specifically, they project global growth to decelerate from 3.2% to 2.6% over the next two years. This forecast is attributed partly to expectations of a moderation in US economic momentum and primarily to the anticipated impact of US tariffs on an already fragile Chinese economy.