US stocks welcome the dawn! UBS Group AG is optimistic about the interest rate cut dividend, while Truist supports the long-term potential of technology stocks

According to the information obtained by Zhitong Finance APP this week, despite the violent fluctuations in the stock market, UBS Group AG's Chief Investment Officer Solita Marcelli remains optimistic about the future upward trend of the US stock market in the coming months. She particularly emphasizes that factors such as the upcoming rate cut by the Federal Reserve and healthy profit growth in the market will support the stock market. Meanwhile, Truist has raised the rating of the technology sector, pointing out that although tech stocks have experienced short-term adjustments, their long-term growth potential remains strong, providing investors with opportunities to improve risk/return.

During the storm of violent turmoil in the stock market this week, UBS Group AG's Solita Marcelli has shown strong confidence in the future upward trend of the US stock market in the coming months. As the Chief Investment Officer of the bank's wealth management department, Marcelli believes that despite recent market volatility, it has not shaken her optimistic expectations for the stock market in 2024.

She points out that with the backdrop of steady economic growth, the Federal Reserve is about to cut interest rates for the first time, which usually signals support for the market. Historical data shows that after the Fed starts easing policy, the S&P 500 Index typically rises by about 17% on average over the next 12 months. Marcelli stated in an interview, "There are also some contrarian buy signals currently, which provide support for the market."

Earlier this week, the Chicago Board Options Exchange Volatility Index (VIX) briefly soared to multi-year highs, which Marcelli sees as a good opportunity for traders to enter the market. She believes that despite some volatility in the market, there is still room for upside.

On Thursday, the US stock market surged significantly, as data released earlier showed that initial jobless claims in the US last week saw the largest drop in a year, easing concerns about economic slowdown. The S&P 500 Index soared by about 2% on Thursday afternoon, poised to achieve its best single-day gain since February.

Marcelli stated that UBS Wealth has always advised clients to maintain their allocation to US stocks during market volatility, and listed four key factors supporting its outlook: healthy profit growth, AI investments, an inflation-deflation environment, and the upcoming monetary easing policy by the Federal Reserve.

Despite investors' concerns about companies' massive spending on artificial intelligence, Marcelli believes that the risk of investing too much cash is negligible compared to the risk of missing out on the potential of AI transformation. The UBS team expects the AI market to exceed a trillion dollars in the coming years.

UBS Wealth also favors high-quality stocks with strong balance sheets, especially in the technology sector, and companies benefiting from the resurgence of real estate activities, including home improvement, insurance, and building materials sectors. In addition, if the Eurozone avoids a recession, given that the region has already started easing policy, the performance of small and medium-sized companies in the Eurozone may outperform US companies.

It is worth mentioning that UBS Wealth's latest year-end target for the S&P 500 Index was raised to 5900 points in mid-July by David Lebovitz, the head of US stocks, indicating an approximately 11% increase from Thursday's level The strategist also stated that if the Federal Reserve cuts interest rates amid the investment and innovation boom, it may further stimulate market vitality and potentially push the index to 6200 points by the end of 2024.

Meanwhile, Truist, after experiencing double-digit selling, upgraded its rating on the technology sector from neutral to overweight. Keith Lerner, Chief Market Strategist at Truist, mentioned that the significant rotation in tech stocks is due to the high threshold for positive surprises, indicating that recent setbacks are more due to crowded positions rather than fundamental changes. From a technical perspective, tech stocks have entered a mildly oversold state, determined by observing the proportion of stocks trading above their 50-day moving average within the tech stock group. This ratio has dropped from 94% in mid-July to 22%. This provides improved risk/reward opportunities for long-term investors.

Lerner noted that the current situation of tech stocks shows signs of indiscriminate selling. He pointed out that at previous market bottoms, tech stocks had entered deeper oversold conditions. This suggests that the current market may experience a similar situation again, meaning that the current correction may not be fully over yet.

However, despite this possibility, Lerner believes that the risk-reward ratio for tech stocks has become more favorable, and the long-term growth story of the tech industry remains intact. In other words, although there may be further adjustments in the short term, the fundamentals of tech stocks remain strong and their investment value has been enhanced.

Previously, in June, Truist downgraded its rating on tech stocks from "overweight" to "neutral" after a sharp rise relative to the S&P 500 index. Truist stated on Thursday that the downgrade was based on their research showing that tech stocks had already "outperformed themselves" in the short term, achieving their best monthly performance since 2002.

Year-to-date, the S&P 500 information technology sector has risen by about 17%, while the S&P 500 has risen by 11.5%, demonstrating the strong performance of the tech sector