Investing.com -- UBS remains upbeat on U.S. equities while taking a more cautious stance on European stocks amid ongoing trade tensions and global economic uncertainty.
“We have an Attractive view on U.S. equities,” wrote UBS strategists. They cited President Trump’s pause on new tariff implementations as a “signal” that he is “attuned to the economic and market risks of tariff policies,” potentially marking a peak in policy uncertainty.
UBS believes this shift could be an inflection point for markets, offering a key tailwind for equities.
Despite ongoing volatility, UBS maintains a 2025 year-end target of 5,800 for the S&P 500. The firm expects flat earnings this year with S&P 500 EPS at $250 in 2025, and a rebound to $275 in 2026, or 10% growth.
“Sentiment is poor and volatility is very high,” UBS noted, pointing out that both are typically contrarian signals. The firm added that the VIX volatility index and investor surveys indicate potential for a strong rebound over the next 12 months.
In contrast, UBS holds a Neutral rating on Eurozone equities. “Economic uncertainty has risen materially in the past month on the back of U.S. trade tariff announcements,” wrote UBS strategists.
The bank now expects zero earnings growth in 2025, down from a previous forecast of 5%.
While risks are “evenly balanced at current levels,” UBS sees opportunity in select areas.
The firm recommends exposure to Eurozone small- and mid-cap stocks, along with sectors relatively insulated from tariff risks, such as utilities, IT, industrials, and real estate.
In its base case, UBS targets the EuroStoxx 50 at 5,200 by year-end but warned of a possible downside to 3,500 in a severe recession.
UBS emphasized that European equities remain highly sensitive to trade developments and central bank actions.