The economic ‘no landing’ could drive the S&P 500 to a 13% gain in 2025, UBS says

The stock market is on track for another year of double-digit gains, according to UBS.

Strategists at the bank made a bullish call for stocks in a note on Friday, predicting the S&P 500 would reach 6,600 by the end of next year.

That forecast implies around 13% upside from the benchmark index’s current levels, and the rise will be fueled by a “no landing” for the economy, the firm said.

In that scenario, economic growth continues, the job market remains strong, while inflation and interest rates might remain slightly higher than markets had previously expected under a hard landing or a soft landing scenario.

“[T]he bottom line is that the improved US macroeconomic outlook increases our degree of certainty about our positive view of equities. We have upgraded US equities to Attractive from neutral,” strategists said in a note on Friday, pointing to data that suggested the economy was on a solid bedrock.

The job market is proving resilient, despite tighter financial conditions and higher interest rates. The US added 254,000 jobs in September, way more than the expected 147,000, according to the Bureau of Labor Statistics. The jobless rate, meanwhile, remained near historic lows, with unemployment dipping to 4.1%.

Economic activity also remains robust. Retail sales grew an above-expected 0.4% over the month of September, and GDP expanded 3% year-over-year in the second quarter.

Inflation, meanwhile, is moving closer to the Fed’s 2% target. Consumer prices grew 2.4% annually in September, while personal consumption expenditures inflation, the Fed’s preferred inflation measure, grew 2.2% year-over-year in August, its lowest reading since 2021.

Cooling price growth sets the stage for the Fed to continue cutting interest rates, UBS said, which is bullish for stocks. Markets are pricing in a 72% chance the Fed will cut rates another 50 basis points by the end of year, according to the CME Fedwatch tool.

The strategists added that while investors may see some volatility ahead of the November election, it’s unlikely to interrupt more positive market catalysts.

“The US presidential election is unlikely to derail positive fundamentals. We expect volatility to rise in the runup to the election as neither party holds a clear advantage in any of the key swing states that will decide the outcome. But the election is taking place against a backdrop of Fed rate cuts, US economic momentum, and supportive secular trends like artificial intelligence (AI),” the note added.

Other forecasters have said a “no landing” is looking to be more likely, given the underlying strength of the US economy. Still, the New York Fed sees a 57% chance of the economy tipping into a downturn by September 2025.