S&P 500 Index to reach the 5000 level by year-end – UBS

Amid fears of Fed policy error and the worries over the delta variant, a heated debate about how to navigate growth and inflation’s return from orbit is expected. Economists at UBS do not forecast a sharp slowdown, and they expect the equity rally to continue.

See – S&P 500 Index: Break above 4454 to reassert the uptrend for a move back to the 4480 high – Credit Suisse

Solid fundamentals to outweigh COVID-19 uncertainty

“The Fed remains eager to avoid alarming markets, and inflation looks unlikely to compel them to tighten prematurely. The seven-day moving average of new cases in the US has more than doubled since the meeting, and Fed Chair Jerome Powell has said that the pandemic is ‘still very much with us’ and continues to cast a shadow over economic activity. On the price side, the latest data indicates that key drivers of inflation started to normalize in July.”

“The delta variant of COVID-19 could delay the recovery, but not derail it. The continued spread of the delta variant has led to renewed restrictions in several countries. But we are also seeing promising signs that the global vaccination drive is picking up pace again.”

“Economic and earnings fundamentals look set to remain robust, even though growth momentum may be slowing. While the second quarter may mark a peak in momentum, fundamentals remain robust.”

“Instead of a hard landing, we expect inflation to recede gradually in 2022 and growth to remain strong. Against this backdrop, we now expect 45% growth in S&P 500 earnings in 2021 and think consensus forecasts for 2022 are likely to be revised upward by nearly 10%.”

“We expect the S&P 500 to reach 5,000 by the end of 2022. We maintain a risk-on stance and position in stocks that should benefit from strong economic growth. We prefer Japan, financials, and energy”