A year-end rally in US stocks seemed like a lock a few weeks ago. Now Wall Street isn’t so sure https://t.co/MlnrsCPKVf ...

The selloff in US stocks may have run its course, setting the stage for a year-end rally, according to UBS Securities’ trading desk https://t.co/h4wbMv06bR ...

Market Trend & Year-End Rally - Seasonality suggests a strong year-end rally, potentially pulling forward gains from 2026 into 2025 [2] - Tech sector is expected to continue leading the market, maintaining a concentrated rally [3][4] - Market needs to broaden out for the rally to continue into 2026 [4] Consumer & Economic Concerns - Concerns exist regarding the impact on middle and lower-income consumers, particularly with potential increases in Affordable Care Act payments, which could rise as much as 114% for approximately 22 million people [5] - A K-shaped economy is evident, with investors and those holding real estate and equities experiencing a positive year, while the lower economy faces challenges [6][7] Investment Opportunities - For the value-seeking consumer, Amazon and Costco are highlighted as potential investments between now and year-end [8] - Costco demonstrates resilience with its profitable membership model, private label growth, and a 15% increase in online sales year-over-year [9] - Amazon's blockbuster earnings, AI investments, and cloud growth (AWS) present substantial opportunities [10][11] - Apple is considered approximately 18% undervalued based on a discounted cash flow model, with ongoing AI integration and a 2 billion install base [12]

Market Outlook - City maintains a year-end target of 6,600, set in early August, and currently sees the market at 6,700 plus [1] - The firm anticipates volatility into the Q3 reporting period but expects a year-end rally as Fed rate cuts become more apparent [2] - Expectations for index EPS growth are around 8%, and while achievable, the market's pricing in of continued "beat and raise" is considered aggressive [3][4] Sector Analysis - Communication services have been downgraded to market weight after a 25-year overweight position, reflecting concerns that positive catalysts are already priced in [5] - Tech and semiconductors remain overweight, and financials, particularly banks, are still viewed favorably, needing only to meet or slightly exceed expectations [6] - The market is viewed as split, with roughly half affected by AI and the other half not, with greater concern about the AI-affected portion due to heightened expectations [7][8] Risk Factors - Labor conditions and valuation are key concerns discussed with clients [10] - A government shutdown is currently viewed as temporary, but its impact will increase the longer it persists [14][15] Investment Strategy - The firm is leaning into the cyclical part of the market, including banks and certain retailers, contingent on continued rate cuts [11] - The upper half of the income distribution is expected to drive retail sales through the holiday season [12] - Gold and crypto are seen as hedging opportunities in a strong but highly valued, momentum-driven equity market, especially with central bank buying [13][14]