UBS: Stocks Can Keep Rising Even If Interest Rates Go Higher

Can the stock market keep going up even if borrowing money gets more expensive? UBS thinks so.

UBS Asset Management, one of the world's biggest money managers, says it is still positive on global stocks. Their reasoning is simple: the economy is holding up well, and companies are making solid profits (also called earnings).

This matters because many investors worry about rising interest rates. Interest rates are set by the U.S. central bank, the Federal Reserve (or "the Fed"). When rates go up, borrowing money becomes more expensive, which can slow down the economy and hurt stocks.

Why does UBS think stocks can survive higher rates?

• The U.S. job market is improving.
• Factory activity around the world is speeding up.
• Company profits are growing broadly, not just in one area.

UBS does warn that core inflation (the general rise in prices, not counting food and energy) may stay high in the U.S. This could push the Fed to keep raising rates, and it could make the U.S. dollar stronger.

Where does UBS see the best opportunities?

• Emerging markets and Japan — where they expect the strongest profit growth.
• AI-linked stocks (companies tied to artificial intelligence) — still attractive due to fast-growing profits.

But UBS gives a caution: too many investors are piling into the same AI bets, and risky products like leveraged single-stock ETFs (funds that amplify the ups and downs of one stock) are getting popular. So they recommend spreading your money around — this is called diversification.

What about bonds? UBS is cautious on U.S. government bonds (called Treasuries), expecting them to do worse than stocks if the Fed keeps raising rates. They prefer UK and Australian government bonds instead, where economies are slowing.

The bottom line: UBS believes strong company profits and a steady economy can keep the stock rally (a "bull market") going — even if interest rates climb. Just don't put all your eggs in one basket.

This is an AI-generated summary. Read the original article at: https://www.investing.com/news/stock-market-news/why-ubs-says-the-bull-market-can-survive-higher-rates-4787368