Investing.com — Despite a cautious end to 2024, UBS analysts project that the stock market rally will continue in 2025, driven by several positive factors.
The MSCI All Country World and fell by 1.6% and 2.4%, respectively, in December, which UBS said was mainly due to a small liquidity shortage in the last trading days.
However, global stocks have achieved an impressive return of 20.7% in 2024, with the S&P 500 leading by 25%, marking the best two-year performance of US major stocks this century.
Looking ahead, UBS remains bullish on US equities, expecting the S&P 500 to reach 6,600 by the end of 2025.
They attribute this to “a combination of low borrowing costs, strong US employment, increased US wage growth, continued AI monetization, and the potential for greater capital market activity under the second Trump administration.”
“We expect the S&P 500 to reach 6,600 in late 2025 and suggest that underallocated investors consider using any near-term volatility to add to US stocks, including structured strategies,” the bank wrote.
The paper also highlights the strength of gold, which has returned 27.8% by 2024, driven by central bank purchases and political concerns. UBS expects continued demand for gold as a hedge, despite strong exchange-traded fund (ETF) demand if the Federal Reserve delivers fewer rate cuts than expected.
In fixed income, UBS sees high-grade and investment-grade bonds as attractive. Although the Fed’s hawkish stance has moderated expectations for a rate cut, UBS believes rates could still fall if economic data suddenly weakens.
In the foreign exchange market, UBS says that investors should sell some of the strength of the US dollar and convert to other currencies such as the British pound and the Australian dollar, noting the value of the US dollar.
