UBS forecasts that global stock markets will continue their upward momentum into 2026, with gains spreading from technology sectors to more cyclical industries. The bank cites a combination of enduring structural trends, such as artificial intelligence, alongside favorable macroeconomic factors including easing trade tensions, anticipated interest rate cuts, and proactive fiscal policies in major economies. This environment is expected to underpin robust earnings growth and a broad-based market advance.
Key Points
- Global equity markets are expected to maintain upward momentum in 2026, with gains increasingly present in cyclical sectors along with technology.
- Structural drivers like artificial intelligence remain pivotal, with a strategic focus on various components across the AI value chain as monetization efforts evolve.
- The investment environment benefits from a rare alignment of easing trade tensions, projected Federal Reserve rate cuts, and supportive fiscal policies in major economies, fostering expected double-digit earnings growth for global equities.
UBS has released its outlook for 2026, predicting an ongoing rise in global equity markets with performance broadening beyond technology stocks and extending significantly into cyclical sectors. Analyst Fabian Deriaz comments that while global equities remain on an upward trend, the pace has slightly decelerated; however, the notable expansion of gains among cyclical regions and sectors represents an encouraging development.
The investment bank retains an Attractive rating on equities, backed by a robust combination of structural catalysts, such as advancements in artificial intelligence, and reinforcing macroeconomic conditions. Deriaz highlights AI as a critical ongoing driver and notes UBS's strategic emphasis on diverse exposure along the AI value chain, particularly focusing on intelligence and application segments as monetization efforts intensify.
UBS expresses firm confidence in an economic recovery cycle, supported by several positive factors: diminishing risks associated with trade tariffs, expected interest rate reductions by the Federal Reserve, and an increasingly supportive stance on fiscal policy. The bank underscores a unique confluence of accommodative monetary and fiscal measures worldwide, including the U.S. One Big Beautiful Bill Act, elevated defense and infrastructure investments in Germany, and growth-oriented budget policies in Japan.
Such a supportive backdrop is projected to benefit corporate earnings, with UBS forecasting approximately 12% growth in earnings per share for the MSCI All Country World Index in the upcoming year. The projection also anticipates a widening of performance leadership throughout 2026.
Regarding portfolio construction, UBS continues to advocate for diversification across both geographic and sectoral lines. Beyond traditional technology and utilities sectors, the bank expresses particular favor for global banks, adds U.S. consumer discretionary stocks to its preferred selections, and points to European industrial equities as attractive. Additionally, UBS endorses quantitative investment strategies, highlighted through its recently launched "Quant Pathways" series, aimed at bolstering portfolio stability.
Risks
- The broader economic recovery depends on the fulfillment of anticipated Fed rate cuts and continued easing of trade-related risks, which remain uncertain factors impacting cyclical sectors.
- While fiscal policies appear supportive, changes or delays in legislative implementations across major markets could affect the expected positive trajectory, particularly for infrastructure and defense spending-dependent sectors.
- The rapid evolution of AI monetization introduces risks regarding which segments will successfully capitalize on growth potentials, influencing technology and related sectors' performance.