UBS Chief Investment Officer Solita Marcelli remains optimistic about the S&P 500, predicting a 10% gain to 6,600 by year-end, despite recent market volatility. She cautions that the journey upward is likely to include increased volatility and advises diversification and hedging strategies.

Key Takeaways from UBS’ Outlook

Market Pullback as a Buying Opportunity

The S&P 500 saw a 1.7% decline on Friday, the most significant drop in two months, following weak economic indicators:

• S&P Global PMI Composite hit a 17-month low.
• Consumer sentiment from the University of Michigan dropped to a 15-month low.
• Inflation expectations rose to 4.3%, the highest since November 2023.

However, Marcelli sees this as a buying opportunity, asserting that:

• Inflation concerns are likely overstated and expected to stabilize.
• Risks from tariffs are not materializing as initially feared.
• Earnings growth continues to be robust, supporting market performance.

Inflation Concerns and Economic Growth

While inflation continues above the Federal Reserve’s target, data shows a cooling in housing prices, which should head towards lower rent increases.

Counteracting Tariff Risks

Despite uncertainty, most tariffs have not yet been enforced and are already factored into the market. File economic reports indicate that broader tariffs impacting economic activity are unlikely.

Earnings Growth Leading Stock Price Recovery

The recent earnings season shows strong results, with a 10% profit growth expected to continue into 2025.

Conclusion: Market Volatility Equals Opportunity

UBS remains hopeful that the S&P 500 will reach 6,600 by year-end despite market fluctuations. To navigate this environment, investors should focus on market dips as entry points while prioritizing a strategy that includes diversification and effective hedging.