Can global equities keep rising? UBS sees these factors driving upside

Investing.com -- UBS reiterated a constructive view on global equities in a note Friday, saying resilient earnings and structural growth trends should drive markets higher over the next six to 12 months.

Chief Investment Officer for the Americas and global head of equities Ulrike Hoffmann-Burchardi said higher oil prices and a hawkish repricing of Federal Reserve policy had introduced volatility in September but had not derailed the bank's positive view.

With most economies pursuing expansionary fiscal policy, manufacturing recovering and loan growth accelerating, she said, "we do not believe that a couple of calibration hikes will derail the constructive outlook."

The bank noted equities typically perform well in the early stages of a hiking cycle unless it is unusually steep, as in 2022, and it expects only a shallow cycle as tariff-driven inflation fades.

On the structural side, Hoffmann-Burchardi said "investment in artificial intelligence (AI) infrastructure shows no sign of slowing," with UBS forecasting AI capital spending to grow 84% this year and a further 33% next year.

That is expected to support semiconductors, among its preferred technology segments, while hyperscalers are increasingly monetizing their investments.

UBS forecast earnings growth of 26% this year and 14% next year for the MSCI All Country World index, and said recent gains had allowed valuations to normalize toward their 10-year average.

The bank maintained an attractive view on the U.S., Europe and Asia, with a relative preference for the eurozone, Asia ex-Japan and emerging markets.

At the sector level, it favors a mix of cyclicals such as consumer discretionary and banks and structural plays including industrials and health care, alongside dedicated allocations to AI, power and resources, and longevity.

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