UBS says record earnings, not hype, are fueling historic global bull market

UBS ↘ 2.03% has pushed back against growing bubble fears, arguing that the global equity rally is underpinned by corporate profit growth rather than the speculative excess that preceded the dot-com crash.

Burkhard Varnholt, a senior financial market adviser at the Swiss bank, said investors are being drawn in by what he called "fabulous earnings momentum" rather than a fear of missing out, according to a report published Monday.proactiveinvestors

Profits Outpacing Prices

Varnholt pointed to profit growth of more than 20% per year in the eurozone, with expected earnings per share up 22% in the first half of 2026 alone. Across the MSCI All Country World ex-US Index, forward earnings have jumped 36.9% this year and profit margins have reached a record 12.3%.proactiveinvestors

South Korea's market has led the global performance ranking, up 85%, after its forward earnings roughly quadrupled.proactiveinvestors

The distinction between earnings-led and speculation-led rallies matters, Varnholt argued, because profit growth that outpaces revenue points to rising margins and productivity rather than prices detached from underlying value.

Two Capital-Intensive Megatrends

UBS framed the surge as the product of two investment booms: artificial intelligence and a sharp rise in security-related spending funded by government budgets. Together, the bank estimates these amount to roughly 2.5% to 3.5% of global economic output, a scale it argues will sustain demand for years.proactiveinvestors

Varnholt singled out energy as a striking example, noting that earnings in the S&P 500 energy index rose 55.2% this year even as its valuation multiple fell. He argued that only two factors matter for markets over the long run — corporate earnings and interest rates — with everything else amounting to background noise.proactiveinvestors

Broader Context

The assessment arrives during a pivotal week for markets, with Nvidia ↗ 2.78% set to report earnings on Wednesday and new Federal Reserve Chair Kevin Warsh scheduled to speak at Jackson Hole on Friday. The 40-day correlation between AI stocks and the rest of the S&P 500 has turned sharply negative, suggesting capital is rotating rather than fleeing equities entirely.moomoo

UBS's own earlier forecasts had projected the S&P 500 reaching 7,500 to 7,700 by year-end 2026, and in August the bank noted upside risk to its 20% earnings-per-share growth estimate for the year.finance.yahoo+2