UBS Has Raised Its S&P 500 Price Target for The End of 2025. Here’s Why

Economic

Stocks

Summary:

Investors appear to be pricing in a substantial de-escalation in both trade tensions and geopolitical frictions,...

Investors appear to be pricing in a substantial de-escalation in both trade tensions and geopolitical frictions, according to analysts at UBS.

In a note to clients taking a "neutral" view on U.S. equities, the strategists predicted that the upcoming second-quarter corporate earnings season will likely be "resilient," while a tax-and-spending package currently making its way through Congress will boost company cash flows.

As a result, they lifted their 2025 S&P earnings per share estimate to $265, implying growth of 6%. For 2026, the figure was raised to $285, or 7.5% expansion versus the prior year.

Their targets for the benchmark S&P 500 index were also increased to 6,200 for the end of 2025 and 6,500 for June 2026. On Thursday, the average closed at 6,141.02, hovering near a fresh all-time high despite having gone through deep ructions earlier this year.

"U.S. equities have continued to recover from the tariff induced sell-off in March and April," the UBS analysts said. "We think the recovery makes sense, considering that most large-cap companies should weather the tariffs reasonably well."

However, they flagged that stocks could still experience some volatility -- either to the upside or downside -- in the next few months as traders react to developments around sweeping U.S. tariffs. Crucially, a delay to President Donald Trump’s aggressive reciprocal levies is due to expire early next month, with uncertainty lingering over whether the White House will ultimately extend the deadline.

The analysts noted that goods that have been impacted by other tariffs that currently in place will hit store shelves soon, possibly leading to "a slowdown in economic growth and an uptick in inflation through the summer."

"While investors are already expecting this outcome, any softening in the data beyond expectations could be a headwind for U.S. stocks," the analysts wrote. "Management team commentary and guidance during second-quarter earnings season -- which starts in mid-July -- will likely be a key driver."

Against this backdrop, the brokerage said it prefers the communication services, financials, health care, information technology and utilities sectors.

Source: Investing

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Damon

Economic

Canada’s economy contracted slightly in April, with real gross domestic product declining 0.1%, down from growing 0.2% in March, and lower than estimates of no change, according to data Statistics Canada reported Friday.

The contraction was primarily driven by weakness in goods-producing industries, which fell 0.6% overall. Manufacturing was particularly hard hit, dropping 1.9% in April, the sector’s largest decline since April 2021.

Transportation equipment manufacturing decreased 3.7%, with other transportation equipment plunging 21.6%, marking its first decline in six months. Food production fell 3.6%, while petroleum and coal product manufacturing dropped 5.9% as refineries conducted maintenance amid weakening demand.

Services-producing industries provided some offset, rising 0.1%. Financial investment services surged 3.5%, benefiting from higher equity trading volumes triggered by volatility following the announcement and subsequent pause of U.S. tariffs.

Public sector activity increased 0.4% in April, with federal public administration jumping 2.2% as election-related operations intensified. The arts and entertainment sector grew 2.8%, its strongest performance since March 2022, boosted by five NHL teams advancing to the playoffs.

Wholesale trade fell 1.9%, its largest monthly decline since June 2023. Seven of nine subsectors contracted, led by motor vehicle parts and equipment distributors amid soft trade flows.

Preliminary estimates suggest GDP contracted another 0.1% in May, adding pressure to Canada’s economic recovery. The country’s economy remains heavily dependent on the U.S. market, particularly in oil and gas extraction, which derived 60% of output and 42% of employment from U.S. demand in 2023.

The oil sands subsector shows even greater U.S. dependence, with 87% of its output and workforce tied to U.S. consumption last year. While the Trans Mountain pipeline expansion has increased exports beyond the U.S. in 2024, America remains Canada’s primary crude oil buyer, purchasing 229.8 million cubic metres of Canada’s record 240.4 million cubic metres in crude exports this year.

Source: Investing

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Warren Takunda

Economic

This comes after news that the U.S. and China have finalised the trade accord reached last month in Geneva. "We just signed with China yesterday," U.S. President Donald Trump said at the White House on Thursday night.

U.S. Commerce Secretary Howard Lutnick said in a news interview the agreement means China will "deliver rare earths to us," and in response, "we'll take down our countermeasures."

At one point in April, the total tariff wall on Chinese imports towered at an effective 143%, according to the World Trade Organisation's tracker.

The tariffs risked significantly slowing the U.S. economy, which has prompted significant selling of dollars. The Dollar has fallen by 11% against the British Pound in 2025, and is down 13% against the Euro.

The Dollar jumped on May 12 when markets welcomed news that China and the U.S. had reached an accord to lower tariffs in Geneva, Switzerland. That accord was not a complete trade agreement, and negotiating teams have met since, most recently in London.

Signs that a major tariff shock will be avoided further lower the odds of a U.S. recession, reducing one headwind against the under-fire Dollar.

Good News for the Dollar as Raft of U.S. Trade Deals Near_1

Above: The Dollar has steadily lost value against the Pound in 2025.

Importantly, Lutnick said agreements with 10 major trading partners were at hand.

The deals lower the odds of a trade 'cliff edge' on July 09 being reached, when a temporary moratorium on tariffs announced on April 02 ends.

"We're going to do top 10 deals, put them in the right category, and then these other countries will fit behind," said Lutnick.

"We would expect the USD to depreciate further if tariffs are imposed, and to strengthen modestly if they are postponed again," says Constantin Bolz, Strategist at UBS Switzerland AG.

The comments are a significant signal that trade uncertainty is close to resolving, removing a major uncertainty that has been bedevilling investors since Trump started his second term as President.

"If people want to come back and negotiate further, they’re entitled to, but that tariff rate will be set and off we’ll go," said Lutnick.

There was more good news for the Dollar on reports that U.S. Commerce Secretary Scott Bessent has asked Congress to remove the so-called revenge tax provision (Section 899) from the Big Beautiful Bill that is currently making its way through the U.S. legislature.

The tax is designed to be levied on investors from countries deemed to have 'unfair' taxes on U.S. companies. However, investors see it as punitive and open to significant interpretation, effectively exposing themselves to the whims of the U.S. President.

It's just another significant reason to be wary of U.S. assets, and its removal would also benefit the Dollar.

Source: Poundsterlinglive

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Adam

Bond

U.S. Treasury yields inched higher on Friday as investors awaited the release of a key inflation measure preferred by the Federal Reserve, as well as monitored U.S. President Donald Trump’s renewed threats against Fed Chairman Jerome Powell.

The 10-year Treasury yield was up 2 basis points at 4.271%, while the 2-year yield moved 3 basis points higher to 3.75%. The 30-year yield was little changed at 4.823%.

One basis point is equal to 0.01%, and yields and prices move in opposite directions.

The big event on Friday will be the release of the PCE report for May, which investors will review for fresh clues about the future monetary policy of the world’s largest economy.

Economists polled by Dow Jones expect a headline inflation rise to 2.3% while core inflation which excludes volatile food and energy prices is forecasted to tick up to 2.6%. That’s higher than the 2.1% and 2.5%, respectively, in April.

Investors are also keeping track of data on personal income, consumer spending and consumer sentiment.

Trump renewed his attacks against Powell after the central bank leader testified before Congress on Tuesday and Wednesday, reiterating the Fed’s wait-and-see approach to hold interest rates until the impacts of tariffs on the economy become clearer.

Trump has said that he has a list of “three or four people” who could succeed Powell sooner than the end of his term as chairman in 2026. Trump is expected to announce the successor as soon as September or October, per reports.

Source: cnbc

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Michelle

Economic

Forex

US consumer spending declined in May by the most since the start of the year, indicating elevated uncertainty around the Trump administration’s economic policies is increasingly weighing on the outlook for growth.

Personal consumption expenditures fell 0.3% after adjusting for inflation, according to Bureau of Economic Analysis figures published Friday. The Federal Reserve’s preferred inflation gauge, the PCE price index minus food and energy, rose 0.2% — slightly more than expected.

The decline in spending, which was broad-based, coincides with declining consumer sentiment this year in response to President Donald Trump’s unpredictable trade policy. Inflation has been muted so far in 2025, though many economists expect that it will pick up in the next few months as businesses increasingly pass higher import duties on to households.

Sluggish household demand in May follows the weakest quarter for consumer spending since the onset of the pandemic — a slowdown that risks spilling over into a downshift in job growth.

Personal income, meanwhile, fell in May by the most since 2021 on a pullback in government transfers. Wages climbed 0.4% for a second month, extending a recent run of solid increases. That indicates consumers have the wherewithal to continue spending. The saving rate fell to 4.5%.

Source: Bloomberg Europe

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Adam

Commodity

Oil prices rose on Friday though were set for their steepest weekly decline since March 2023, as the absence of significant supply disruption from the Iran-Israel conflict saw any risk premium evaporate.

Brent crude futures rose 50 cents, or 0.7%, to $68.23 a barrel by 1036 GMT while U.S. West Texas Intermediate crude gained 49 cents, or nearly 0.8%, to $65.73.

During the 12-day war that started after Israel targeted Iran's nuclear facilities on June 13, Brent prices rose briefly to above $80 a barrel before slumping to $67 a barrel after U.S. President Donald Trump announced an Iran-Israel ceasefire.

That put both contracts on course for a weekly fall of about 12%.

"The market has almost entirely shrugged off the geopolitical risk premiums from almost a week ago as we return to a fundamentals-driven market," said Rystad analyst Janiv Shah.

"The market also has to keep eyes on the OPEC+ meeting – we do expect room for one more month of an accelerated unwinding basis balances and structure, but the key question is how strong the summer demand indicators are showing up to be."

The OPEC+ members will meet on July 6 to decide on August production levels.

Prices were also being supported by multiple oil inventory reports that showed strong draws in the middle distillates, said Tamas Varga, a PVM Oil Associates analyst.

Data from the U.S. Energy Information Administration on Wednesday showed crude oil and fuel inventories a week earlier, with refining activity and demand rising.

Meanwhile, data on Thursday showed that the independently held gasoil stocks at the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub fell to their lowest in over a year, while Singapore's middle distillates inventories declined as net exports climbed week on week.

Additionally, China's Iranian oil imports surged in June as shipments accelerated before the conflict and demand from independent refineries improved, analysts said.

China is the world's top oil importer and biggest buyer of Iranian crude. It bought more than 1.8 million barrels per day (bpd) of Iranian crude from June 1-20, according to ship-tracker Vortexa, a record high based on the firm's data.

Source: reuters

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Warren Takunda

Stocks

Wall Street futures were in the green ahead of the bell on Friday as investors patiently awaited the release of last month's personal consumption expenditures index.

As of 1220 BST, Dow Jones futures were up 0.26%, while S&P 500 and Nasdaq-100 futures had the indices opening 0.25% and 0.33% firmer, respectively.

The Dow closed 404.41 points higher on Thursday, while the S&P 500 and Nasdaq finished just below their record highs despite some mixed economic data.

Donald Trump said a "very big" deal had been done with China, but did not provide any details, and added that there could be a separate agreement soon that would "open up" India. A White House official also said on Thursday that Washington and Beijing had reached an agreement on "how we can implement expediting rare earths shipments to the US again".

Futures had both indices opening above yesterday's levels, as the market looked set to bounce back from Donald Trump's "Liberation Day" tariff-fuelled losses.

However, traders will keep a close eye on May's personal consumption expenditures price index, set for publication at 1330 BST, with economists expecting to see the index tick 0.1% higher last month and 2.3% on an annualised basis. Core PCE, which strips out volatile food and energy prices, was expected to rise 0.1% from April and 2.6% year-on-year.

TradeNation's David Morrison said: "Despite a downward revision to first quarter GDP print, investor sentiment remains bullish, underpinned by strong corporate earnings, a better-than-anticipated weekly jobless number, easing geopolitical risks and fresh trade developments.

"With equity markets at or near record highs and no immediate volatility catalyst in sight, it appears that there's little which could trigger a reversal in positive sentiment. That would suggest that investor complacency is setting in. That said, traders remain alert for any catalyst which could spoil the party, especially with key inflation data due later today."

Elsewhere on the macro front, personal income and consumer spending data will also be released at 1330 BST, while the University of Michigan's June consumer sentiment index will follow at 1500 BST.

In the corporate space, Nike posted better-than-feared Q4 earnings and revenue overnight but Donald Trump's so-called "reciprocal" tariffs would cost it roughly $1.0bn this year, before price increases and supply chain shifts.