Strong earnings throughout the rest of the year should lift the S&P 500 more than UBS expected.
The Wall Street firm raised on Monday its year-end price target for the S&P 500 to 4,400 from 4,250, implying a gain of more than 5% from its Friday closing level of 4,173.85. The benchmark is up about 11% year to date.
"Significant upside to earnings should more than offset the challenges from valuation headwinds," UBS chief U.S. equity strategist Keith Parker told clients.
For how to play it, UBS likes names with pricing power due to inflation risk and a handful of "new momentum" stocks, which have strong growth and fundamentals.