Investment strategy insights

19 August 2026, 06:00 UTC Chief Investment Office GWM Investment Research

Looking beyond the obvious in stocks Investment strategy insights Authors: Matthew Carter, Strategist, UBS AG London Branch; Antoinette Zuidweg, Alternative Investments Strategist, UBS Switzerland AG

• While expect the S&P 500 to deliver more gains by year-end, we also believe investors should not overlook the attractive opportunities across European and Asian markets.

• We explore the potential for gains in European, Japanese, and Asia Pacific equities—while underscoring the real risks of holding a concentrated portfolio.

At the time of writing, global stocks as measured by the using tools like structured strategies. Within the market, we MSCI All Country World Index were trading close to all- favor banks, health care, industrials, consumer discretionary, time highs. Despite higher oil and gas prices as hopes for Germany, and companies in our “European Leaders” theme. a sustainable US-Iran deal waver, a mix of moderating US inflation and robust earnings in both the AI value chain and Second, we like Japanese equities. Corporate earnings beyond have buoyed stocks. US equities (the S&P 500 Index) are resilient, with operating profit growth in the second have touched fresh record highs this year. quarter running at more than 20% year over year and positive earnings surprises supporting the outlook. We But the rally has not been confined to US equities. And while believe the market has likely established a cyclical bottom, we expect the S&P 500 to deliver more gains by year-end, and the recent valuation reset has created attractive we also believe investors should not overlook the attractive entry points in high-quality companies with durable opportunities across European and Asian markets. earnings growth. We favor balanced exposure to AI-related companies, including semiconductor equipment, as well as This is especially important in an environment where the companies positioned to benefit from rising power demand US markets’ dependence on AI remains high, with elevated linked to electrification, digitalization, and AI infrastructure concentration risks. Now may be the right time to position investment. But aligned with our broadening theme, we for a broadening stock rally. also like cyclical recovery beneficiaries such as banks and machinery. Investors who do not want to buy single First, European investors should look close to home. stocks themselves can consider actively managed vehicles We believe European equities have room to rise and break focused on the largest Japanese companies, including those new highs. Stoxx Europe 600 companies are on track for whose valuation metrics may underappreciate their earnings the strongest second-quarter profit growth in four years. growth potential. The region is not just a beneficiary of near-term tailwinds, but also a more durable investment cycle underpinned by Third, look afresh at the wider Asia-Pacific region. rising spending on defense, infrastructure, AI, automation, Our positive view on Asia ex-Japan is based on our electrification, and energy security. European stocks remain earnings growth forecast of 72% this year and 20% more exposed than the US to energy-market disruption. But the next, supported by the region’s AI hardware supply with improving business activity, stronger order trends, and chain and a recovery in cyclical segments. Within regions, Germany’s fiscal impulse likely to broaden the recovery, we we remain constructive on mainland Chinese equities, believe any dips or consolidation because of heightened favoring A-shares over H-shares. Improving earnings geopolitical tensions present an opportunity to “buy on momentum—driven by IT and health care—alongside dips”—either based on a financial plan or systematically policy support, resilient exports, and ongoing AI adoption

This report has been prepared by UBS AG London Branch, UBS Switzerland AG. Please see important disclaimers and disclosures at the end of the document.

should underpin growth, while valuations remain attractive, particularly in offshore markets. In India, an improving macro backdrop, accelerating earnings growth, and more…