UBS lower its value goal for the S & P 500 and expects earnings estimates may decline farther from right here — the most recent potential indicator of an impending slowdown. The funding financial institution cited extended larger inflation and rising yields as the explanation for chopping the value goal and EPS forecast for the broader market index. UBS lower the S & P 500 value goal to 4,150 in 2022, and 4,400 in 2023, based mostly on revised actual and nominal 10-year yield forecasts. These estimates are down from 4,850 and 5,000, respectively. “We imagine there may be modest upside for equities given our assumptions of slowing development however no recession in addition to decelerating inflation,” UBS strategist Keith Parker stated within the observe. “Falling bond volatility is a needed pre-condition for a sustainable bottoming in shares.” The revised estimates come because the broader market index stays about 19% off its highs, and as Wall Road appears forward this month to what many count on will probably be a unstable earnings season. Traders count on earnings estimates will come down as many corporations work by better inflationary pressures. UBS additionally trimmed its earnings forecasts based mostly on a slowing gross home product development fee and rising prices, although the funding financial institution believes income and margins will get a lift within the close to time period from sturdy nominal development. UBS lowered its EPS forecast to $234 in 2022, and $247 in 2023. These forecasts are down from $235.5 and $250 beforehand. “We tweak our earnings forecasts decrease as some variables have shifted, with dangers to the draw back for earnings estimates this 12 months and extra so subsequent 12 months,” the observe learn. —CNBC’s Michael Bloom contributed to this report.
