ubs hv monthly letter 16 July

UBS House View Monthly Letter | 16 July 2026 | Chief Investment Office GWM, Investment Research

Strong profit growth Global broadening Managing risks Asset allocation US earnings momentum We believe broad global Risks to the rally include AI We rate equities as Attrac- remains strong, underpin- earnings strength, an setbacks, prolonged energy tive and like the US, Asia ex- ning the rally. While AI infra- improving cyclical backdrop, supply disruptions, and Japan, Europe, Japan, and structure investment is con- and structural growth trends tighter central bank policy. emerging markets. We see tributing to profit growth, give investors a range of Diversification, exposure to fixed income as Attractive, broader gains support our ways to participate in the bonds and commodities, and favor a diversified constructive S&P 500 view. rally across European and and hedging strategies can approach. Asian markets. help navigate risks.

Earning it With the S&P 500 close to all-time highs, debate continues over whether the rally reflects strong fundamentals or excessive enthusiasm. Our view is that the rally has been earned, with robust profit growth providing the foundation for the advance. First-quarter S&P 500 earnings growth was the strongest in four years, reflecting still-healthy economic activity, continued AI-related investment, and improving earnings in some more cyclical areas of the market. We expect second- quarter earnings growth to be even higher.

Still, investors will need to continually reassess the evolution of the AI growth story as they consider the sustainability of current earnings, particularly with the beneficiaries of AI adoption likely to keep shifting over time—from semiconduc- Mark Haefele tors and infrastructure toward energy, applications, and companies that can trans- Chief Investment Officer late the technology into productivity gains. Global Wealth Management

Follow me on LinkedIn In our view, the next stage of the market cycle is unlikely to be defined by a single linkedin.com/in/markhaefele source of return, but by a wider group of companies and regions delivering earn- ings growth. And we note that recently, cyclical sectors—such as financials—and defensive laggards like health care have outperformed tech.

Overall, we see around 10% upside for global stocks (MSCI All Country World Index) through mid-2027 and believe investors should broaden exposure across regions to capture a wider range of opportunities and growth drivers, and to man- age single stock risks. We upgrade European equities to Attractive and continue to like US and Asian equities. We forecast 2026 earnings growth of 21% for global equities, followed by another solid year in 2027.

Our views, live with Q&A Risks to the rally include renewed fears of central bank rate hikes if energy prices The next CIO global livestream will take place on 21 July. rise further or inflation proves sticky. AI capex or monetization trends could fall Join here or watch the replay. short of investors’ expectations. The path toward a lasting peace between the US

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

and Iran is proving bumpy. And wide gaps between individual stock performance mean concentration risks are elevated, particularly for portfolios with large exposures to a small number of companies, a single region, or a single theme.

We believe this reinforces the case for a diversified core portfolio, including global equity diversification, targeted allocations to long-term innovation themes, and exposure to quality bonds, commodities, and alternatives. We also favor enhancing portfolio income through diversified fixed income strategies, including exposure to emerging market and high yield credit.

Can earnings keep the US rally on track?

US earnings momentum remains Earnings growth has been the main support for the US equity rally, and recent strong. results suggest that momentum is intact. First-quarter S&P 500 earnings growth was already the strongest in four years, at around 20% on an underlying basis. And with the second-quarter earnings season underway, we believe growth could surpass that…