UBS Keeps Equities Attractive, but Its Bull Case Has Conditions

UBS continues to rate global equities as attractive, arguing that corporate earnings and artificial-intelligence investment can outweigh higher bond yields and energy costs. The call is constructive, but it is not a simple forecast that markets rise regardless of conditions.

The bank projected the MSCI All Country World Index at 1,460 by December 2026 and 1,510 by June 2027, according to Proactive. The index stood at 1,359 on September 14. Those levels imply gains of roughly 7% and 11%, respectively, before dividends, based on the cited starting point.

The argument starts with economic resilience. In its current house view, UBS forecasts global growth of 3.2% in 2026 and 3.4% in 2027. It expects uneven performance across regions, including eurozone growth of 0.8% and 1.2% and Chinese growth of 4.5% and 4.6% over those two years. The bank believes that resilient activity and earnings can support equities even as central banks keep policy relatively tight.

AI spending is the largest swing factor in the equity outlook. UBS expects hyperscalers to maintain large capital programs and sees opportunities not only in computing, but also in the power, resources and infrastructure required to build data centers. That broadens the investment case beyond the most visible technology companies, but it also raises the risk of bottlenecks in power availability, permitting and private financing.

Regional assumptions differ. UBS expects continued earnings support in the United States despite inflation and tighter monetary policy. It views recent European weakness as partly reflecting energy prices, rates and sovereign spreads, while citing lower valuations and forecasting 15% eurozone earnings growth in both 2026 and 2027. In Asia and emerging markets, higher oil prices, bond yields and a stronger dollar have weighed on returns, though UBS argues that valuations already reflect considerable pessimism.

The scenario range shows how dependent the target is on those assumptions. Proactive reported that UBS's upside case places the global index at 1,670 by June 2027 if AI investment exceeds expectations, geopolitical disruptions ease or the effective U.S. tariff rate falls below 10%. Its downside case is 990 if conflicts intensify, AI returns disappoint, capital spending falls and central banks are forced into aggressive rate cuts during 2027.

Those are scenarios, not probabilities. The downside case is especially useful because it identifies the transmission mechanism: weaker returns on AI spending would reduce capital expenditure, hurt earnings expectations and challenge the valuation premium of companies tied to the buildout.

Investors can use the UBS view as a framework rather than a market-timing signal. Earnings breadth, power availability, data-center approvals, credit conditions and realized returns on AI investment will determine whether the base case holds. A diversified global allocation can benefit if growth remains resilient, but the wide scenario range argues against treating the 1,510 target as a promise.