UBS Forecasts 10% Global Stock Upside Through Mid-2027 on Strong Earnings

UBS anticipates approximately 10% upside for global stocks through the middle of 2027, asserting that the current market rally has been “earned” through strong corporate profit growth. In a note Friday, the bank’s Chief Investment Officer Mark Haefele argued the advance is supported by fundamentals rather than excessive investor enthusiasm.

An Earnings-Driven Market

According to the firm, first-quarter S&P 500 earnings growth was the strongest recorded in four years, a reflection of healthy economic activity and sustained investment related to artificial intelligence. UBS also noted improving earnings in more cyclical market sectors and expects second-quarter earnings growth to be even higher.

Looking ahead, the bank forecasts 21% earnings growth for global equities in 2026, to be followed by another solid year of growth in 2027. This robust profit outlook forms the basis of its positive market call.

Broadening Leadership and Regional Shifts

UBS suggests the next phase of the market cycle will not be driven by a single source of return. Haefele wrote that investors should expect “a wider group of companies and regions delivering earnings growth.” This points to a potential broadening of the rally beyond the technology sector that has led gains.

The firm highlighted recent outperformance from cyclical sectors like financials and defensive laggards such as health care. In a strategic shift, UBS upgraded European equities to Attractive while maintaining its preference for U.S. and Asian equities.

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The Evolving AI Theme

While AI remains a key driver, UBS advised that investors will need to reassess how the growth story evolves. The bank anticipates that the primary beneficiaries of AI adoption will likely shift over time.

This evolution could see the focus move from the initial winners in semiconductors and infrastructure toward other areas, including:

• Energy providers powering data centers
• Software and application developers
• Companies that successfully translate AI into tangible productivity gains

Identified Risks

Despite the positive outlook, UBS flagged several risks to the forecast. These potential headwinds include renewed fears of central bank rate hikes should inflation prove sticky, disappointing AI-related capital expenditures or monetization, and geopolitical tensions. The firm also noted the elevated concentration risk in the market, given the wide performance gaps between individual stocks.