Position for market upside

18 September 2026, 12:42 UTC Chief Investment Office GWM Investment Research

Position for market upside Position for market upside Author: Sagar Khandelwal, Strategist, UBS Switzerland AG

• Why? 1) We expect global equities to move higher, supported by resilient economic activity, broader earnings growth, and AI investment. 2) AI remains a key driver of returns, but opportunities are broadening across sectors, regions, and long-term growth areas as investment spending and earnings growth extend beyond the largest technology companies. 3) Cash is unlikely to overcome the combined challenge of inflation, taxes, longevity, and withdrawals. Resilient growth, broadening earnings, and sustained • Why now? 1) History suggests that “all-time highs” AI investment support further equity gains, while are neither rare nor a reliable warning signal. diversification can help manage concentration and valuation risks. Source: Mariola Grobelska_Unsplash Valuations also have a poor record as short-term timing tools. 2) We view AI as a technological transition that can expand aggregate earnings and economic activity. 3) For diversified portfolios, the long-term cost of remaining uninvested has often proved greater than the temporary cost of living through a geopolitical drawdown.

We believe the equity rally will continue over the coming six This backdrop of resilient economic activity, broadening to 12 months. The global economy remains on solid footing, earnings growth, and robust AI investment supports further and this means the interest rate hikes by the Federal Reserve equity market gains, in our view. Investors should maintain and the European Central Bank should not yet be of major diversified core equity allocation, reduce concentrated concern. Historically, the time to be concerned about market single-stock positions, and retain targeted exposure to performance after rate hikes is when growth starts to falter, transformational innovation and longer-term investments. but our expectation for relatively modest tightening should Investors with the means and sufficient risk appetite can also see only a limited impact on growth. consider structured equity participation, yield strategies, and multifactor strategies. Our base case remains for relatively limited energy disruption and inflation that does not become sufficiently broad or Core global equity exposure persistent to derail growth. AI-related investment should Investors with concentrated single-stock positions should also remain a powerful tailwind. consider broadening exposure across regions, sectors, and investment styles. Given the big differences between Overall, we forecast S&P 500 earnings to grow 25% this the top- and bottom-performing sectors and stocks, year, followed by a 14% increase in 2027. We expect concentration can significantly affect portfolio outcomes. earnings growth in the Eurozone to be 15% for both this Broadening exposure can help portfolios take part in further year and next. Within Asia, we forecast Japanese corporate market gains while reducing company-specific risk. We profits to grow 12% for FY26, and we expect earnings expect positive returns across the US and most global growth of 72% for the rest of the region this year. markets. On a relative basis, we prefer the Eurozone, Asia ex-Japan, and emerging market equities for their more pro-

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

cyclical exposure over the more defensive UK and Swiss markets.

Targeted exposure to transformational innovation and longer-term opportunities AI remains a powerful investment driver. Global AI-related capital expenditure is expected to reach around USD 900bn in 2026 and approximately USD 1.2tr in 2027. The opportunity extends beyond the largest technology companies to semiconductors and hardware, software, power infrastructure, utilities, and industrials.

Other longer-term opportunities include power and resources, longevity, and health care innovation. Areas of focus include grid resilience, renewables, nuclear power, critical minerals, obesity treatments, oncology, cardio- metabolic conditions…