Here’s Why The Bull Market is Intact Despite Valuation Concerns

UBS told investors in a note this week that the equity bull market remains intact despite recent market volatility and mounting worries over high valuations.

U.S. equities fell sharply this week. But UBS believes some consolidation was to be expected “after a strong run over the past several months,” adding that the “fundamentals supporting the rally remain intact.”

“High valuations do not necessarily signal an imminent correction,” UBS wrote. “Stocks rarely fall simply because valuations are high. Instead, declines are more likely when corporate profit growth disappoints.” 

The bank noted that earnings results so far had exceeded historical averages, forecasting S&P 500 earnings per share to rise 10 percent this year, with a further 7.5 percent growth expected in 2026.

UBS also argued that valuations were justified by the growing dominance of higher-multiple sectors like technology. 

It highlighted that 12-month forward price-to-earnings ratios for major tech firms remain far below dot-com era levels, “around 30 times, compared to over 70 times for market leaders in 1999.”

The bank believes the tech sector’s fundamentals “remain robust,” citing strong demand for artificial intelligence infrastructure and resilient balance sheets.

“Investing is likely a long-term endeavor for many, so we believe it is essential to focus on one’s personal financial objectives and stick to an investment plan when challenged by volatility,” UBS commented, advising clients to keep diversified portfolios spanning equities, fixed income, alternatives, and gold. 

“We maintain the view that the equity bull market has further to go,” it concluded.