UBS projects 12% EPS growth for the MSCI AC World Index this year, driven by easing tariff headwinds, anticipated Federal Reserve rate cuts and supportive fiscal policies. The firm highlights a constructive macroeconomic backdrop and structural growth trends underpinning sustained global equity rallies.

UBS notes that investor positioning remains below price levels reached during the recent rebound, with many having reduced risk exposure during volatility spikes. This underinvestment, similar to last April’s tariff-driven selloff, suggests that rebuilding exposure could fuel further upside.

The strategist team favors industrials for both cyclical and structural growth appeal and recommends a barbell strategy in the U.S. focused on consumer discretionary, financials, health care and utilities. Preferred geographic markets include the U.S., Japan, emerging markets and Switzerland, while AI exposure is targeted outside of U.S. large-cap technology, particularly among Chinese tech names.

UBS trimmed its price target for Rolls-Royce, citing cash flow risks stemming from jet fuel supply disruptions despite the engine maker’s resilient order book. The adjustment reflects slightly lower forecasts for aviation cycle performance given prolonged Middle East tensions.