UBS Predicts S&P 500 Will Reach 6,600 by 2025 Driven by Central Bank Policies

According to Bob Elliott, the chief investment officer at Unlimited Funds, global central banks are currently easing monetary policy in a manner that is not typical based on previous economic cycles. This easing occurs despite the backdrop of strong economic growth, high asset prices, and significant inflation.

Overview of Central Bank Policies: On December 2, 2024, Elliott noted that central banks have historically implemented easing measures during economic downturns, citing examples from past crises such as the post-COVID period, the financial crisis, the tech bust, and the 1998 crisis. By the end of this year, nearly 80% of the major central banks worldwide are expected to be in easing mode, which Elliott indicated parallels the peaks observed during those prior crises.

Elliott's analysis shows that monetary policy is set to ease further, suggesting that an additional 100 basis points of easing could occur in 2025, building on the 100 basis points already enacted over the past year. He emphasized that there is currently no strong evidence showing that the global economy requires such aggressive easing measures.

"The global central bank policy is clearly over-easy right now," Elliott remarked, adding that this assessment is not limited to the United States alone.

Concerning inflation's persistent nature, Christopher Waller, a Federal Reserve Board member, mentioned the possibility of not implementing a rate cut in the upcoming meeting. Waller argued that even if they proceed with a rate cut, the existing monetary policy would remain restrictive enough to allow for a cautious approach to future cuts, aiming to meet inflation targets.

Waller humorously compared the struggle against inflation to an MMA fighter who cannot pin down inflation, suggesting that eventual submission to controlled inflation remains unavoidable.

UBS's Market Outlook: As a consequence of the ongoing easing of monetary policy, stock markets typically benefit from increased liquidity. Mark Haefele, chief investment officer at UBS Global Wealth Management, described the current decade as the "Roaring 20s," characterized by robust economic growth, strong market performance, and improving productivity.

In UBS's recent report for 2025, Haefele projected that the S&P 500 index could reach 6,600 by the end of 2025, reflecting about a 10% increase from current levels. He anticipates that central banks will continue to lower interest rates, which would contribute to reduced cash returns and promote further economic activity.

In his assessment, Haefele indicated a positive outlook for sustained economic growth in the U.S., driven by healthy consumer spending, relaxed fiscal policies, and lower interest rates. However, he warned that tariff threats might pose challenges for Asian and European economies, although possible economic stimulus measures from China could help mitigate those effects.

UBS, S&P500, Economy