Wall Street's bullish sentiment continues to rise! Following Morgan Stanley, UBS also raised its target for the S&P 500: Bullish logic supported by AI profitability and consumer resilience.

UBS Global Wealth Management has released its latest outlook, raising its year-end target for the S&P 500 index in 2026 from the previous 7500 points to 7900 points, and setting a target of 8200 points for June 2027. It maintains its "attractive" rating on the US stock market, citing strong demand for data center infrastructure by companies, as well as resilient consumer spending. This is another Wall Street major bank that has raised its target price for the S&P 500 index in recent weeks. Previously, Morgan Stanley raised its year-end target for the S&P 500 index in 2026 from 7800 points to 8000 points, and HSBC also raised its target from 7500 points to 7650 points in mid-May. Senior strategist Adrian also raised the target price from 7700 points to 8250 points. An optimistic expectation around the S&P 500 is forming on Wall Street. UBS: Resilient consumer spending and strong demand for data centers driving growth Despite the ongoing instability in the Middle East, which has led to oil prices hovering at high levels and bringing inflation risks, the market does not seem to be worried. The S&P 500 index recorded its largest monthly percentage increase since November 2020 in April, reflecting the market's optimism. According to UBS, the core factors driving the bull market remain intact. The bank clearly stated in its report released on Thursday, "We continue to believe that a resilient economy and earnings growth, support from the Fed, and the widespread deployment of artificial intelligence will continue to boost the stock market." UBS also raised its expectations for the earnings per share of S&P 500 component stocks for 2026, from the previous $310 to $335. The strategist specifically pointed out that the improvement in earnings expectations is highly concentrated: about half of the increase comes from semiconductor demand, especially the upward trend in storage chip prices, and a quarter comes from the energy sector, benefiting from the increase in energy demand driven by data center construction. According to data from LSEG as of May 15, the S&P 500 index saw a nearly 29% year-on-year increase in earnings in the first quarter, with AI-related weighted stocks contributing the majority of the increase. Wall Street overall outlook: Target prices moving higher In addition to UBS, several institutions have raised their year-end expectations for the S&P 500 recently. Mike Wilson, Chief Equity Strategist at Morgan Stanley, in an outlook report released on May 13, raised the year-end target for the S&P 500 index in 2026 to 8000 points and set a target of 8300 points for mid-2027. Morgan Stanley's 2026 EPS forecast is $339, slightly higher than UBS's $335; its 2027 EPS forecast is $380, and it is looking towards $429 in 2028. Wilson explicitly stated in the report, "Our bullish view on the index is based on earnings growth, not valuation expansion." He further pointed out that even if the Fed maintains interest rates, historical backtesting shows that in an environment of strong earnings growth, the median stock price return can reach 14%. Furthermore, Wilson also stated that the market's previous adjustment was not "blind optimism," but a profound internal restructuringaround half of the stocks in the Russell 3000 index have experienced at least a 20% retracement, and the forward P/E ratio of the S&P 500 has compressed by about 18% from its peak, indicating that the market has fully priced in multiple risks such as the Iran conflict, AI impact, and private credit pressure. Ed Yardeni, a senior strategist on Wall Street and president of Yardeni Research, significantly raised the year-end target for the S&P 500 from 7700 points to 8250 points, making him the most bullish among mainstream institutions on Wall Street. He simultaneously raised the 2026 EPS forecast to $330, with the core logic being that rebounding corporate earnings beyond expectations are driving US stocks into a performance-led "fusion rally." HSBC, while optimistic, also highlighted concerns about the narrow breadth of the market. The bank pointed out that most stocks are still below their 52-week highs, and if the upward trend can spread to more sectors, there is still room for further upside in the index. HSBC expects EPS growth to be around 20% to $325 in 2026, with the "seven giants" remaining the main contributors to earnings growth. In an optimistic scenario, if tech stock valuations remain high and AI-driven profit growth spills over to a wider range of industries, the S&P 500 index may even surpass 8000 points. Hormuz Strait: The "Sword of Damocles" hanging over the bull market Despite the prevailing optimism, UBS also issued a clear warning to the market in its report: the continued uncertainty in the Hormuz Strait could erode the core DRIVING factors supporting the current bull market. UBS strategists pointed out that the recent rise in oil prices and interest rates has put pressure on some sectors. If the situation in the Hormuz Strait remains unclear, continued oil price increases will raise inflation expectations, forcing interest rates to remain high for a longer period. This combination is particularly unfavorable for growth stocks that rely on long-term growth expectationshigher interest rates mean that investors will discount future profits, compressing valuation space. Morgan Stanley also acknowledges in its report that inflation is the main threat facing the current bullish view. However, Wilson believes that as long as inflation does not trigger a new round of rate hikes, the pricing power brought by strong demand will actually support the stock market.