UBS: S&P 500 to 5,200 Thanks to AI

UBS: S&P 500 to 5,200 Thanks to AI


UBS, a well known Swiss bank that recently acquired Credit Suisse, forecasts that the S&P 500 index could surge to 5,200 in 2024. Why? Because AI. UBS contends that the transformative potential of artificial intelligence (AI) can enhance profit margins, shrink valuations, and provide the innovation necessary to push the S&P 500 to 5,200 in a best case scenario. That would mean roughly a 14.2% gain from current levels.

UBS analysts have also raised the mid-2024 price target for the S&P 500 to 4,700 per share, citing expected improvements in earnings growth next year.

The projected S&P 500 earnings per share (EPS) are $220 for 2023 and $240 for 2024, reflecting stable and 9% year-on-year growth, respectively. Notably, EPS figures similar to these have already been predicted by the likes of BMO long before the AI boom took the market by storm.

UBS has observed that robust economic activity is positively impacting corporate profits, with second quarter earnings results boosting confidence in S&P 500 EPS growth.

For the remainder of 2023, UBS expects the S&P 500 to finish out the year at 4,500, anticipating a stable market that has little room from here over the next two quarters, and that the stock market will really begin the move higher once the Fed begins cutting rates next year.

UBS also did something that a lot of analysts who aren’t really sure about themselves do — completely contradict themselves with a “bearish scenario” that is entirely opposite of their headline prediction. Specifically, UBS notes that a U.S. recession and high inflation could lead to a drop in the S&P 500, potentially to 3,500. 

If you’re wondering, here’s a graphic on where UBS and the other hedge funds & institutions stood this time last year:

This was created in September of last year, depicting the predictions of several funds regarding the 2022 EOY price of the S&P 500.

UBS was relatively close — the S&P 500 closed at 3839.50. The only funds that were closer were Morgan Stanley, Goldman Sachs, and Bank of America. 

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