The S&P 500 is up 12.1% in 2026, gaining about 11.1% over six months and 3.1% over three. Moreover, the Nasdaq Composite climbed 12.6% year to date and 14.4% over six months, though it was down nearly 0.4% over three months, while the Dow has risen 10.8%, 7.4%, and 5.9%, respectively. All three indices are running ahead of their late-August 2025 pace. Now, according to TheFly, UBS just reset its S&P 500 outlook for the rest of the year.

However, that doesn't mean that the ride's been easy.

Stocks just wrapped up a losing week as higher Treasury yields, inflation worries, and ongoing tensions around Iran tested a rally that's already carrying lofty valuations. AI stocks wobbled even as corporate earnings remained incredibly strong.

That tension makes UBS's move interesting, as it's not simply chasing an index that has already rallied into double digits.

That said, UBS now sees greater room for stocks to climb through year-end, supported by an unusually robust profit engine.

UBS bull case is really an earnings reset

On August 21, UBS Global Wealth Management bumped its year-end 2026 S&P 500 target to 8,100 from 7,900, keeping U.S. stock as "attractive". Moreover, it also lifted its mid-2027 target to 8,400 from 8,200.

Based on the S&P 500's Friday close on August 21 at 7,674.37, the 8,100 target now represents a 5.5% additional price upside into year-end. The 8,400 mid-2027 target implies roughly 9.5% upside from Friday.

UBS's new call has everything to do with what the bank expects corporate America to earn.

For perspective, its old 7,900 target was based on a 2027 earnings forecast of $375, implying nearly 21.1 times earnings. Its new 8,100 target against the new $400 estimate works out to nearly 20.3 times.

In essence, the bank's telling investors they don't need to suddenly accept a far richer valuation for the S&P 500 to continue climbing.

The bank sees three major pillars in resilient U.S. growth, supportive monetary policy and continued AI adoption.

Earnings breadth, though, is perhaps the most important development.

Earlier this month, UBS said nearly 80% of S&P 500 companies were beating earnings estimates, compared with a historical average of about 73%. Moreover, the median earnings surprise was 5.8%, comfortably above the typical 3.5%, while underlying Q2 earnings growth was running over 30%.

By August 19, UBS estimated underlying growth approached 35%. Similarly, FactSet's Q2 update showed S&P 500 earnings growing 32% year-over-year, even excluding the likes of Alphabet (GOOG) and Amazon's (AMZN) massive gains, while 10 of 11 sectors posted superb earnings growth, and eight delivered double-digit gains.