Europe's Earnings Momentum Drives UBS to Bullish Stance on Stocks

UBS's Chief Investment Office has expressed an upbeat outlook on global equities, recommending that investors look beyond the US to capture a broadening stock market rally. The Swiss bank noted that global stocks hit fresh highs this week after softer US inflation data eased worries over an imminent Federal Reserve rate hike.

The S&P 500 and Stoxx Europe 600 closed near record levels, while Asian markets rallied in response. UBS emphasized the importance of diversification across regions to manage elevated concentration risk in US markets.

On Europe, UBS pointed to earnings momentum, with Stoxx 600 companies on track for their strongest second-quarter profit growth since 2022. The bank favors banks, healthcare, industrials, and consumer discretionary stocks in the region, as well as Germany specifically.