US Equity Strategy: Market outlook: higher growth not priced

Research evidence excerpt

US Equity Strategy: Market outlook: higher growth not priced

Global Research

20 July 2026ab

US Equity Strategy Equity Strategy

AmericasMarket outlook: higher growth not priced

Keith Parker

Strategist

Earnings fueled rally has further to run, higher growth underpriced keith.parker@ubs.com

+1-212-713 3296

We are bullish US equities and target SPX 8100 in 2026 and 8900 in 2027, as the

earnings fueled rally continues with NTM EPS forecast to rise ~25% the next 18mo. Sean Simonds

StrategistForward sales growth CAGRs have risen to the highest level since before 2003, with the

sean.simonds@ubs.com

recent acceleration comparable to early-cycle periods in 2003, 2009 and 2020. Our +1-212-713 2851

framework shows fair value P/E above 24x, leaving SPX ~18% below implied despite

improving growth and CFROI. Markets appear to be pricing slower growth, lower Gerry Fowler

margins and/or higher rates, while earnings revisions, profitability and long-term growth

gerry.fowler@ubs.com

expectations continue to move higher. The P/E to sales CAGR ratio has fallen near the +44-20-7567 5490

lows of 2008-12. Drawdown risks from geopolitics, rates and numerous AI issues

remain, but we see attractive asymmetry for equities in the months and year ahead. Maxwell Grinacoff, CFA

maxwell.grinacoff@ubs.com

Differentiated tools for a concentrated, higher growth market +1-212-713 3892

Tech+ is ~50% of SPX weight and effective index breadth has fallen to 40 constituents.

Marc el Koussa

Thus, we model Tech+ and ex-Tech EPS separately and our aggregation approach is Strategist

more flexible now than traditional methods. We incorporate proprietary sales growth marc.el-koussa@ubs.com

CAGRS and HOLT CFROI into valuation analysis because they now matter more than +44-20-7567 0298

rates/spreads for P/Es.