UBS Predicts New Peaks: Stocks Poised for Record Highs

The S&P 500 index (SPX) notched its 26th record close of 2024 on Monday, ending at an all-time high of 5,360.79 after minor dips on Thursday and Friday. This milestone marks the 26th record close this year, per Dow Jones Market Data. The Nasdaq Composite (COMP) also reached its 14th record close of 2024, rising 0.4% on Monday, according to FactSet.

U.S. stocks seem poised for more record highs, although potential challenges could arise from unexpected inflation data or outcomes from the Federal Reserve’s upcoming two-day policy meeting, UBS reports.

A moderate reading from May’s consumer price index, expected on Wednesday, similar to April’s 3.4% annual increase, would likely reinforce investor confidence in a continuing disinflation trend, says Jason Draho, head of asset allocation at UBS Global Wealth Management. Draho noted that only a significant upside surprise, like those seen in the first quarter, could disrupt this confidence.

Wednesday will also conclude the Fed’s June policy meeting. While no rate cuts are anticipated, updates to the Fed’s “dot plot”—the projected path of interest rates—are expected. The latest median projection of three rate cuts for this year is likely to be revised down to two cuts for 2024.

Despite a slight rise in the unemployment rate to 4% in May, Draho points to positive economic indicators, such as a 6% increase in air travel this year compared to 2023. This suggests that while consumer spending is slowing, it is mainly impacting goods rather than services.

Draho warned that any disappointments from the CPI report or the Fed could slow stock momentum but still anticipates more all-time highs.

The S&P 500’s current record tally is the highest since 2021, which saw 70 new all-time highs. The record to beat, however, remains 1995, with 77 records. The Dow Jones Industrial Average (DJIA) closed up 0.2% on Monday, while the benchmark 10-year Treasury yield (BX:TMUBMUSD10Y) rose by 4 basis points to 4.468%.