UBS concedes it wasn’t bullish enough on stocks
USB strategist Jonathan Golub just boosted his price target on the S&P 500, saying that inflation could actually be a boost for equities.
“Despite our bullish outlook, it appears we were not bullish enough,” Golub wrote in a note.
“Returns and profits are measured in nominal dollars,” he said. “Put differently, higher inflation tends to be a positive for stock prices.”
“While the market sold off on more robust CPI and PPI reports last week, our work indicates that these demand-driven readings are constructive for future returns.”
He raised his S&P (SP500) (NYSEARCA:SPY) (IVV) (VOO) target to 5,400 from 5,150. That would be a gain of about 8.5% from current levels.
“This new target represents 7.9% potential upside through year end,” Golub said. “We are also increasing our 2024-25 EPS estimates from $235 to $240, and $250 to $255, implying 9.1% and 6.3% growth over the next 2 years (vs. consensus estimates of 10.5% and 13.2%).”
In addition, Golub boosted Financials (NYSEARCA:XLF) to Overweight from Neutral and cut Healthcare (NYSEARCA:XLV) to Neutral from Overweight.
“While Health Care remains our preferred group within defensives, we see greater opportunity in cyclical sectors given continued economic strength,” Golub said. “Financials benefit from rising interest rates, the potential for resurgent M&A, and easing lending standards.”
More on the markets
Source link