Fundamentals Remain Solid Amid Uncertainty

UBS maintains an optimistic outlook on global equities, targeting an S&P 500 level of 7,900 by year-end despite sticky inflation pushing Fed rate cut expectations to December. Strength in corporate earnings and AI adoption remain the primary drivers of market performance.

Key Takeaways

• 1.Despite inflation concerns and delayed Fed rate cuts, corporate fundamentals in the US, Eurozone, and Asia remain robust, supporting an 'Attractive' view on equities.
• 2.The Federal Reserve's first rate cut is now expected in December 2026, as core inflation has been slower to decline than previously anticipated.
• 3.Rising US government debt (approaching 8% of GDP) is a long-term risk to yields, though not an imminent cause for abandoning risk assets in 2026.

Table of Contents

• From the studio
• Thought of the day
• What to watch: 29 May
• Caught our attention
• Market update
• Global asset class preferences definitions
• Appendix

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