ab5 February 2024Global Research and Evidence LabUS Equity StrategyRoadmap - February 2024 Rally Continues, Leadership ShiftsThe S&P 500 rose 1.7% in January (18.2% in the post-October rally). TECH+ leadership was mixed for the month, with TSLA and AAPL down -24.6% and -4.2%. Small cap, high beta, and econ-sensitive stocks—which led the past 2 months—all lagged.Robust Economic Releases Support Further Market Upside Economic releases have been particularly strong YTD, including payrolls, consumer confidence, and PMIs. Economic surprises have surged, while GDP forecasts improved and recession forecasts have fallen. This is reflected in fewer expected Fed cuts.4Q23 Reporting Season: 7½% Consensus EPS Masks Divergent Results With 60%+ of S&P 500 market cap reported, forecasts are for 4Q EPS growth of 7.5%. However, stock/sector growth rates are quite uneven (TECH+ 40%, HCare -13%, Energy/Materials -25%). 2024 growth should be more uniformly positive, save Energy.Fundamentals—Not Rates—Driving Stock PricesInterest rates have been of secondary importance to stock prices over the past 13 months (10-year yields are roughly flat over this period). Throughout the post-October rally, stocks have risen by similar amounts on both up and down interest rate days.S&P 500 Target from 4850 to 5150, 2024 EPS from $225 to $235 On January 16, we raised our target from 4850 to 5150, 6.3% upside from January 31 levels. We also increased our 2024-25 EPS estimates from $225 to $235, and $246 to $250. We continue to favor TECH+, Industrials/Discretionary over Energy/Materials within Cyclicals, and Health Care within Defensives. ISM Manufacturing47.149.145.252.947.052.5DecJanDecJanDecJanNew OrdersPrices PaidPMISource: ISM, Bloomberg, UBSThis report has been prepared by UBS Securities LLC. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantitative Research Review published by UBS, begin on page 79. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.Equity StrategyAmericasJonathan GolubStrategist jonathan.golub@ubs.com +1-212-713 8673Patrick PalfreyStrategist patrick.palfrey@ubs.com +1-212-713-2000Will JacksonAssociate Strategist will.jackson@ubs.com +1-212-713-2000Nicholas SamoyednyAssociate Strategist nicholas.samoyedny@ubs.com +1-212-713-2000 US Equity Strategy 5 February 2024ab 2Inside the RoadmapMarket Leadership …....................................................................... 3-13Economy ………………………........................................................ 14-29Interest Rates & Volatility .............................................................. 30-38Earnings ..................................................................
