Strong US earnings growth should push stocks even higher before the outlook becomes less certain in 2027, with a risk that margins come under pressure, according to Bhanu Baweja, chief strategist at UBS Group AG.

Baweja noted that while current earnings momentum remains robust, investors should prepare for potential headwinds as margin compression becomes a growing concern heading into 2027.

He emphasized that the disconnect between record-high valuations and underlying fundamentals could amplify volatility, particularly if corporate profit margins fail to sustain their current trajectory.

Despite near-term optimism, Baweja advised caution, urging clients to monitor macroeconomic signals and earnings quality closely as they navigate an increasingly uncertain landscape.