The U.S. stock market’s powerful 2025 rally still has room to run next year, according to UBS, which says earnings growth, easier monetary policy and clearer policy could keep equities climbing into 2026. Strategists at the bank argue that market gains have been driven by profits rather than frothy valuations. Corporate earnings have continued to beat expectations this year, led by technology companies, leaving forward price-to-earnings multiples only slightly higher than at the start of 2025. UBS expects S & P 500 earnings per share to rise about 10% in 2026, a pace it says could lift the index to roughly 7,700 by the end of neat year. “While some may worry investor reticence signals deeper trouble, we see multiple catalysts ahead that should help reignite equity market momentum into early 2026,” UBS said in a note to clients. UBS expects further interest-rate cuts following the Federal Reserve’s third consecutive reduction in December, with another move likely in the first quarter of 2026. The naming of a new Fed chair in January to replace outgoing chair Jerome Powell could reinforce a dovish shift, the bank said, citing recent comments from candidates including Kevin Hassett and Fed Governor Christopher Waller, both of whom have signaled room for additional easing. Investors may also gain clarity from an upcoming Supreme Court ruling on President Donald Trump’s tariff authority, expected early next year. While UBS expects any relief from lower tariffs to be temporary, it says the decision could reduce uncertainty and influence near-term sentiment. Even if markets pause in coming weeks, UBS said the broader backdrop argues that investors should stay committed to stocks. The bank maintained its “attractive” rating on U.S. equities, saying investors should position for further gains into 2026. “So regardless of whether a December rally materializes, we believe investors should position for further advances in equity markets,” UBS said.
Why the 2025 stock market rally can continue in 2026, according to UBS
Dec 22, 2025
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