UBS Asset Management stated on the 20th (local time) that stocks could continue rising despite concerns over semiconductor sector peaks and escalating Middle East tensions, citing three key supporting factors. The asset manager explained that while market volatility may increase, a positive environment will support global stock markets in the coming months. This assessment comes as geopolitical risks intersect with ongoing debates about artificial intelligence infrastructure spending and corporate earnings momentum.
UBS Cites US Peace Diplomacy Efforts in Middle East
UBS Asset Management emphasized that the United States remains actively engaged in resuming peace talks despite deteriorating Middle East conditions. The firm stated that both sides have strong motivations to avoid returning to full-scale war. UBS explained that a prolonged closure of the Strait of Hormuz would negatively impact the US economy and cut off Iran's major revenue source. The asset manager noted that while restoring shipping industry confidence and oil production levels may take longer than expected, the impact on core inflation will be limited, meaning central banks will not implement aggressive tightening policies.
AI Infrastructure Demand Remains Robust Amid Cost Competition
UBS Asset Management assessed that artificial intelligence-related demand continues to show strength. The firm stated that China Moonshot's Kimi3 model is not necessarily negative for AI infrastructure because it is cost-comparable to cutting-edge models. However, UBS analyzed that investors may continue to feel uncertain about capital expenditure increases beyond 2027.
S&P 500 Companies Report 90% EPS Beat Rate
UBS Asset Management identified strong corporate earnings as an additional positive factor for the market. The firm noted that although only about 10% of S&P 500 companies have reported results, nearly 90% of these companies exceeded earnings per share (EPS) estimates. The median beat rate recorded an impressive 8.8%. UBS highlighted that banks showed loan growth and increased fee income, while other companies reported solid consumer demand and spending. The asset manager forecasts that S&P 500 companies will achieve 28% EPS growth over the three-month period.
FAQ
What three factors does UBS Asset Management cite for potential stock market upside?
UBS Asset Management identified three factors on the 20th (local time): US active engagement in Middle East peace talks with both sides motivated to avoid full-scale conflict, robust AI infrastructure demand despite cost competition from models like China's Kimi3, and strong corporate earnings with nearly 90% of early S&P 500 reporters beating EPS estimates by a median 8.8%.
What earnings performance did S&P 500 companies report according to UBS?
UBS Asset Management stated that about 10% of S&P 500 companies have reported results, with nearly 90% exceeding earnings per share estimates at a median beat rate of 8.8%. Banks demonstrated loan growth and increased fee income, while other companies showed solid consumer demand and spending. UBS forecasts 28% EPS growth for S&P 500 companies over the three-month period.
