A jump on the way? Investment giant reveals surprising opportunities
A new research report by UBS bank presents the sectors that will show an abnormal growth of about 25% in profits, and explains which stocks should be examined right now despite the fear of escalation and global inflation.
The European stock market continues to demonstrate strength, after indices on the continent recently reached record levels. In a daily investment research report by UBS, published yesterday (Tuesday), it is estimated that the cyclical improvement in the economy alongside large-scale structural investments may continue to support the market.
UBS predicts a significant profit cycle, with growth of about 25% in company profits during 2026 and 2027, a rate that according to the bank may be higher than current market forecasts. However, the uncertainty surrounding the conflict between the USA and Iran, high energy prices, and bond yields in Europe continue to weigh on investor sentiment.
As part of the exposure distribution between sectors, UBS gives preference to cyclical consumer companies, which benefit from relatively low valuations, improvement in profit forecasts, and high savings among consumers in the European Union and China. In contrast, basic consumer goods companies receive a neutral rating, partly due to a slow growth rate in sales and a lack of pricing power.
European banks also receive preference. UBS notes stable demand for loans, with an increase of about 3% in loans in the Eurozone, mainly in the field of business credit and mortgages. In addition, about 80% of banks showed profits higher than forecasts in the second quarter. Insurance companies, on the other hand, received a neutral rating due to high valuations and a slowdown in profit forecast updates.
The healthcare sector is defined as the preferred defensive sector in the report and receives an attractive rating. The sector recently traded with a decline following the fighting in the Middle East, with the forward P/E ratio standing at 16.5. UBS estimates that company profits in the field may grow at a rate of mid-to-high single digits this year and next year.
Developments in the USA and China are also in focus. The US 30-year bond yield rose to 5.31%, the highest level since 2007, against the backdrop of concerns about the deficit and inflation. In China, a slowdown was recorded, with industrial output in July rising by only 4.5% and retail sales by 0.6%.
According to UBS, the data from China may lead to further easing in government policy. At the same time, the bank recommends examining the Chinese technology sector, including chips, hardware, and supply chains in the field of artificial intelligence.
In the long term, UBS suggests investors focus on "European leaders", meaning companies that may benefit from significant investments in artificial intelligence, electrification, and security, alongside cyclical economic recovery.
