UBS says stocks could rally 11% by the end of 2020, and lays out the areas of the market it's tipping for success

• The S&P could end the year at 3,150, UBS said Friday, a gain of some 11% from current levels.
• After huge volatility this year, stocks had their best month since 1987 in April, and that trend is likely to continue thanks to huge central intervention in markets since the coronavirus pandemic began, the Swiss bank said.
• Mark Haefele, chief investment officer at UBS Global Wealth Management, said: "The massive monetary and fiscal stimulus rolled out over recent months could lead to a recovery to pre-crisis output by the end of 2021."
• UBS pointed to companies in sectors likely to benefit from trend acceleration during the coronavirus such as e-commerce as those that could benefit in any market rally.
• Track the S&P 500 live on Markets Insider.

Stock markets have experienced roller-coaster levels of volatility and slumped to new levels in recent weeks but UBS is more optimistic and is betting on the S&P 500 rising as much as 10% by the end of the year.

The coronavirus pandemic has roiled markets, seeing US stocks slump into a bear market before rallying sharply and enjoying their best month in three decades in April.

That upwards trend will carry on throughout the year, Mark Haefele, chief investment officer at UBS Global Wealth Management said in a research note Friday.

"Over recent weeks, a path to our upside scenario, in which we see a sustained return to normality from June, has emerged," Haefele wrote.

"If some combination of testing, tracking, and treatments enables a sustainable end to lockdowns, the massive monetary and fiscal stimulus rolled out over recent months could lead to a recovery to pre-crisis output by the end of 2021.

"On that trajectory, we would expect the S&P 500 to end this year around 3,150," Haefele added.

The S&P 500 is trading at $2831.79, as of 12.20 p.m. ET Friday, meaning that ending the year at 3,150 would mark a gain of some 11% from current levels.

UBS also added that recent monetary and fiscal efforts to prevent companies from going bankrupt means that an economic recovery is more likely. In mid-March the Federal Reserve announced plans to inject $5 trillion into stressed markets, and reduced interest rates close to zero.

It extended these measures by announcing a $2.3 trillion package on April 9 to increase lending and buy corporate debt, in efforts to help companies survive the pandemic.

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Haefele's optimism comes days after drug maker Gilead reported progress in testing an existing antiviral drug on people with coronavirus. The drug, remdesivir has still not obtained approval by the FDA, but news of positive developments in testing has boosted sentiment this week.

But Haefele said the risks around the uncertainty of whether an easing of lockdowns will trigger a second wave of coronavirus infections, means he favors selective equity strategies that are "well positioned to gain from further upside or positioned to limit the downside in the event of a relapse in the COVID-19 pandemic."

Haefele said he also favours:

• Select cyclical stocks that would outperform in an upside scenario.
• Stable and defensive stocks, such as non-discretionary consumer stocks, that "might perform more strongly in our central scenario."
• Companies that stand to benefit from longterm trends that are likely to be accelerated by COVID-19, including e-commerce.

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