UBS Expects Further US Stock Gains; Bullish on Gold

UBS said in a note this week that expectations for U.S. Federal Reserve rate cuts have strengthened, creating what the bank describes as a supportive backdrop for equities, bonds and gold. 

In its latest update, UBS wrote that “market expectations for a Federal Reserve rate cut in December climbed further” after new data pointed to cooling momentum in the U.S. economy.

Fed funds futures now imply an 84% chance of a 25-basis-point cut at the next meeting, up sharply from 50% a week earlier. 

UBS believes rate-cut hopes firmed after comments from senior Fed officials, including Vice Chair John Williams and Governor Christopher Waller, who “signaled support for easing policy in the near term.” 

Softer economic readings added to the shift: ADP data showed private payrolls declining on average through early November, retail sales missed expectations and core wholesale prices fell short of forecasts.

Despite the easing trend, UBS maintains a constructive outlook. “We continue to expect two more rate cuts through the first quarter of 2026,” the bank said, adding that historically, U.S. equities perform well when rates are falling and the economy avoids recession. 

UBS expects earnings growth of “around 11% in 2025 and 10% in 2026” and continues to target the S&P 500 reaching 7,300 by June 2026.

The bank also sees opportunities beyond equities. Falling yields should support “capital gains for quality bonds,” with UBS forecasting the 10-year Treasury yield at 3.75% by mid-2026. 

Meanwhile, lower real rates “increase the appeal of gold,” which UBS believes remains in an ongoing bull trend.

“We believe further Fed easing amid above-target inflation should continue to support the precious metal,” stated the bank. “We view gold’s recent consolidation as a pause in its ongoing bull run.”

With “more policy easing ahead,” UBS advises investors to ensure adequate exposure to equities, quality bonds and gold, while reviewing currency allocations as the U.S. dollar loses appeal.