Investors might buy the belief that U.S. stocks are overvalued, but that's not stopping them from buying stocks at record highs. Irrational exuberance? Not so much, says two of Wall Street's most visible names.
On Monday, the S&P 500 scored fresh upgrades from two big investment banks — UBS (UBS) and Citigroup (C) — who are joining the index's bullish chorus. The two raised their year-end price targets, joining a parade of institutions which have made similar revisions in the face of stronger earnings, so-so economic data, and rising optimism that tariff turbulence will be short-lived.
UBS lifted their year-end target to 6,100 (from 5,500). That target was ~4.5% below the S&P 500's Friday close of 6,389.45, but analysts at the Swiss bank warn that a pullback is coming in the near-term given the market's recent rally.
They remain bullish, nonetheless. In their note, released this morning, they issued their first 2026 year-end target, expecting the index to continue its upward momentum next year. They expect the index to close out 2026 at 6,800, which is a 6.43% increase relative to Friday's close.
Citigroup also raised its S&P 500 target, with its year-end target hiked to 6,600 (from 6,300). Its strategists raised the index's earnings forecasts for 2025 and 2026, adding that the new Republican tax and budget bill could make up for tariff headwinds. This assumes a 3.3% increase in the index between now and year's end, with limited turbulence forecast in the interim.
UBS and Citi's new targets are the latest out of big Wall Street banks, which have seeked to revise the targets they cut during the April tariff tiff. However, they're not alone in their bounce back to bullishness.
It's Not Just the Big Guys, Though
In Bank of America's August Fund Manager Survey, the bullishness is even more telling. The bank's monthly survey showed that money managers showed that 91% of respondents thought that U.S. stocks are “overvalued.”
That didn't stop them from piling into the market, though. Nearly a majority (45%) of respondents said they were long on Magnificent 7 stocks like Nvidia (NVDA) , Microsoft (MSFT) , and Apple (AAPL) . Further, fund managers raised their equity concentrations in recent weeks, making them the most bullish since at least Feb. 2025, two months before the tariff turbulence struck.
And while investors agree that valuations have gotten steep, nobody wants to miss the gravy train, especially as it seems to be careening higher. Cash holdings are near record lows in the survey, showing just how bullish that institutional investors are.
Notably, historically low cash holdings in the BofA survey might offer a warning to investors. With little cash left on the sideline, smaller institutions might not have much more dry powder to deploy into the market, leaving limited room for further upside.
