UBS strategists project the S&P 500 will reach 7,700 by December 2026, maintaining an Attractive view on U.S. equities as economic conditions remain favorable. The bank forecasts interim targets of 7,300 by June 2026 and expects earnings per share to grow 11% to $277 in 2025 and 12% to $310 in 2026.

While large-cap tech has driven recent gains, earnings growth is broadening beyond the Magnificent 7, which accounted for nearly two-thirds of 2025 earnings growth but is expected to contribute about 50% this year. The strategists note that AI data-center capital spending growth is poised to decelerate after surging more than fourfold over the past three years, consuming nearly all hyperscalers' operating cash flow.

Despite downgrading Information Technology and Communication Services sectors to Neutral due to concerns about returns on aggressive AI spending, UBS maintains its bullish outlook. The bank expects two additional 25-basis-point Federal Reserve rate cuts this year and notes that historically, equities outperform when the Fed is easing and the economy avoids recession. "We think this bull market has further to go," strategists said, maintaining their year-end S&P 500 price target of 7,700.