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S&P 500: Recent recovery looks vulnerable as recession fears mount – UBS

The S&P 500 has gained 12.6% since its 2022 low in mid-October. Nevertheless, recent stock rally looks vulnerablein the opinion of UBS analysts.

Profits will fall 4% next year

“Although the October data showed an encouraging drop in inflation and the Fed’s comments have been less aggressive recently, we believe that the market moved too fast to assume that the central bank has managed to end the threat of inflation.”

The road back to the Fed’s 2% inflation target could be bumpy, raising new concerns about the level of rates that will have to rise. Also, we believe markets have been downplaying the threat posed by slowing growth to earnings.”

“We expect S&P 500 earnings to fall 4% next year, versus the consensus of a 5% increase in earnings based on bottom-up forecasts.”

Source: Fx Street

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