• UBS lifted its S&P 500 price target from 5,400 to 5,600, marking the highest target on Wall Street.
  • The new estimate stems from diminishing recession risk and strong earnings growth.
  • UBS also raised its estimate for earnings-per-share growth for 2024 and 2025.

Shrinking recession risks and estimate-beating earnings growth have prompted UBS to once again lift its S&P 500 year-end target, the bank said in a Tuesday note.

It now expects the benchmark index to hit 5,600 by the end of 2024, implying a 5.6% increase from current levels of 5,300.

Although UBS had upgraded its S&P target as recently as February, recent economic data has made that month's 5,400 forecast look too weak.  

"Since then, consensus 2024 GDP forecasts have increased from 1.6% to 2.4%," analysts led by Jonathan Golub wrote. "At the same time, recession/tail risks have declined on a number of key metrics including economist surveys and the Chicago Fed's Financial Conditions Index."

UBS' 5,600 projection leads other Wall Street estimates, for which the median is 5,300. 

On top of that, first-quarter earnings strength has spurred more bullishness, as most firms substantially beat projections. While consensus called for earnings-per-share growth of 4.1%, EPS growth was up 10.6% for the quarter, UBS said, and robust second-quarter estimates point to further upside for the market. 

UBS boosted earnings-per-share forecasts to $245 from $240 this year and raised 2025 estimates to $260 from $255.

Despite the bank's optimism, some analysts still fear a recession could hit the US economy and send shares downward. 

Forecaster Gary Schilling told Business Insider that equities could drop as much as 30% given that labor market weakness could trigger economic fallout.

Read the original article on Business Insider