UBS: US stock market correction has bottomed out, rebound expected by year-end.

UBS Securities' trading arm reportedly stated that the US stock market sell-off may have ended, laying the foundation for a year-end rebound. Last week, the stock market plummeted as investors doubted the prospect of further easing by the Federal Reserve and withdrew from crowded AI trading. The S&P 500 and Nasdaq 100 indices fell approximately 4% and 7% respectively from their record highs at the end of October, both approaching their 100-day moving averages.

However, UBS believes that with benchmark indices finding support at this key technical level, the sell-off in systemic funds largely subsiding, and expectations of a Fed rate cut next month appearing to be back on track, the stock market is poised for strength.

“Our view is that the current de-risking phase has now ended,” wrote Michael Romano, head of equity derivatives hedge fund sales at UBS, in a report released last Sunday.

Romano predicts the S&P 500 will rise to around 7,000 by the end of the year, believing the November market correction has adequately repositioned investors, creating conditions for further gains. The strategist anticipates the recent pullback may have ushered in a unique December – a period where momentum stocks (which typically experience rapid and significant price swings) are poised for strong performance.