US stocks have further room to rally despite mounting uncertainty following Donald Trump’s return to the White House, UBS analysts believe.
Though near-term volatility was likely as Trump laid out key policies following Monday’s inauguration, UBS highlighted a string of factors set to support growth.
Artificial intelligence-related investment was among likely drivers of growth, the bank said in a note.
Highlighting Trump’s Tuesday unveiling of the US$500 billion AI infrastructure Stargate plan, UBS said the announcement underpinned recent bullish sentiment across the sector.
Ongoing US economic growth and interest rate cuts were also seen as boosting equities, in spite of inflationary pressure from sweeping tariffs threatened under Trump.
“In our base case, Trump’s tariff measures should not keep inflation from moderating further,” UBS continued.
“While we continue to watch the new administration’s next moves closely, investors should not lose sight of the fundamentals that remain favorable for US equities. We continue to like technology, utilities, and financials, and see value in utilizing structured strategies to navigate near-term volatility.”
A string of big technology earnings in the coming weeks, including from Apple Inc and Meta Platforms Inc, were expected to provide upward pressure too, according to UBS.
“We think further upward revisions in their capital spending are likely. We also expect a narrowing gap between AI revenue and capex to drive big tech’s 25% earnings growth for the December 2024 quarter,” analysts wrote.