US Equities

17 September 2026, 20:05 UTC Chief Investment Office GWM Investment Research

US equities CIO View: US Equities David Lefkowitz, CFA, CIO Head of US Equities, UBS Financial Services Inc. (UBS FS) Nadia Lovell, Head of Global Equity Strategy & Management, UBS Financial Services Inc. (UBS FS) Matthew Tormey, CIO Equity Strategist, US Equities, UBS Financial Services Inc. (UBS FS)

• US stocks have been slightly weaker in recent weeks. A strong Global Asset Class Preference Attractive second-quarter earnings season has had to contend with a re- escalation of the US-Iran war and higher interest rates. S&P 500 15 Sep 26 7,586 • We believe the bull market remains intact driven by: 1) a resilient economy and strong profit growth, and 2) AI investment and Dec 26 8,100 adoption. While monetary policy is no longer a tailwind, we don't Jun 27 8,400 think the Fed will need to hike enough for monetary policy to become Source: Refinitiv, UBS a meaningful headwind, but this bears watching. Attractive sectors • Our December 2026 and June 2027 S&P 500 price targets are 8,100 and 8,400. We expect S&P 500 EPS growth of 25% (USD 350) in • Consumer discretionary: Consumer 2026 and 14% (USD 400) in 2027. spending should remain resilient. Year-to- date increases and volatility in energy prices • Absolute view: Attractive; Relative preference (in comparison to other are manageable, provided prices don't equity regions): Neutral spike to new highs.

• Financials: Robust capital markets activity, easing regulations, and improving profitability should support strong earnings Central scenario growth. For payments, transaction volumes remain supportive while other secular US equity performance has been flattish in recent weeks. A strong second- tailwinds persist. Recent credit trends also quarter earnings season has had to contend with a re-escalation of the US- suggest broad stability. Iran war and higher interest rates. Still, stocks are performing well on a year-to-date basis, and we continue to believe that the bull market remains • Health care: While we see no near-term intact. We retain a positive bias despite the recent shift in our outlook for catalyst for negative health care policies, Fed policy, which now calls for a slight tightening in monetary policy. While we are watching the policy backdrop monetary policy is no longer a tailwind, we don't think the Fed will hike as the US midterm elections approach. rates enough for it to turn into a headwind. Strong earnings growth and AI Valuations have crept higher, but still adoption remain key positive drivers. We discuss each in more detail below. appear reasonable.

As mentioned, our economists recently updated their Fed view. They • Industrials: The increase in the ISM Manufacturing index gives us confidence now expect a slight increase in the fed funds rate this year. In the past, that cyclical segments of the economy look we've highlighted a supportive Fed, which cut rates in 2024 and 2025, to be improving. Developments related to as a key driver of the bull market. While we now expect the Fed to hike the US-Iran conflict will be important to rates, we don't think this shift is material enough to derail the corporate monitor. Also, the sector includes exposure profit growth outlook. Considering that temporary factors such as tariffs to attractive secular themes. and energy prices are driving most of the elevated inflation, we don't think the Fed will need to tighten aggressively. Therefore, if economic • Utilities: The sector's defensive growth remains resilient and inflation improves in line with our base case, characteristics should offer ballast in a stocks should have further upside. That said, developments in the US-Iran portfolio if economic growth slows further. war remain an unknown and could be a key driver of how much the Fed We maintain our favorable view on AI raises interest rates. trends. Roughly 25% of the sector has material exposure to AI power demand. With respect to earnings, we believe the outlook continues to be favorable. Second-quarter results were strong and broad. Also, forward guidance and

This report has been prepared by UBS Financial Services Inc. (UBS FS). Please see…