UPDATE 1-UBS lifts S&P 500 annual forecast on robust consumer spending, AI demand

UBS Global Wealth Management has raised ​its 2026 year-end forecast ‌for the ​S&P 500 to 7,900 from 7,500, citing resilient consumer spending and strong demand for data center infrastructure.

A growing ‌number of brokerages have lifted their S&P 500 targets in recent weeks, with Morgan Stanley forecasting 8,000 by the end of 2026 on strong AI-driven investments and earnings optimism, largely ‌overlooking inflation risks from higher oil prices tied to the Middle East conflict. The ‌wealth manager's current target implies about a 6% upside to the index's last close of 7445.72 points.

It also introduced a June 2027 target of 8,200 for the index, while retaining its "attractive" view ⁠on ​U.S. equities, and raised ⁠its 2026 earnings-per-share estimate to $335 from $310. "We continue to believe the bull market drivers remain intact: resilient ⁠economic and profit growth, a supportive Federal Reserve, and the AI rollout," UBS strategists said ​in a note on Thursday.

The increase in profit estimates is concentrated, with about half ⁠driven by semiconductor demand, especially memory chip pricing, and another quarter from higher energy sector profits alongside ⁠rising ​data center investment, they said. First-quarter S&P 500 earnings were on track to climb almost 29% year over year, with much of that fueled by Wall ⁠Street's AI-related heavyweights, according to LSEG data as of May 15.

However, UBS said the ⁠lack of a ⁠resolution around the Strait of Hormuz could begin to undermine these bullish drivers, with recent increases in oil prices and interest ‌rates pressuring some ‌sectors.

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