US stocks just got a rare upgrade from a top bank even as the trade war rages on

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UBS upgraded US stocks to “attractive” from “neutral” amid Trump tariff pause and market volatility.
Trump’s 90-day tariff pause sets the stage for trade deals and a shift in news flow.
High volatility historically leads to strong returns, UBS said.

UBS upgraded its rating for US stocks to “attractive” from “neutral” on Friday, brightening its view of the market even as trade war jitters persist.

The bank highlighted three reasons why now is a good time for investors to buy stocks, even amid the ongoinge trade war and volatility.

The S&P 500 has made multiple intraday moves of nearly 10% this week, both to the upside and downside, and that heightened volatility is ultimately an opportunity for long-term investors.

“While downside risks do remain, we believe the risk of a more severe economic downturn is now more limited,” Ulrike Hoffman-Burchardi, CIO of global equities at UBS Global Wealth Management, said.

While a number of big firms have lowered their ratings and cut price targets for stock in the coming months, UBS is upbeat. Here’s what the bank sees for the market.

UBS thinks that Trump’s pivot on Wednesday to pause “reciprocal” tariffs on most countries for 90 days reduced the extreme economic downside scenarios.

The U-turn came after extreme downside volatility in the stock market and upside volatility in Treasury yields, which hamstrung the administration’s goal to lower interest rates before a big chunk of US debt is due for refinancing later this year.

“We believe the demonstrated willingness from the Trump administration to change its stance in response to equity and bond market turbulence indicates some sensitivity to market stress, and points to the existence of a ‘Trump put’ in some form,” Hoffman-Burchardi said.

While high tariffs on goods from China remain in place, the US could still strike a number of trade deals with other countries, as well as ultimately de-escalate the China tariffs.

That sets the stage for a positive shift in the news flow, as the 90-day tariff delay opens the door to a flurry of deals.

Positive trade negotiations could help investors refocus their sights on 2026 with some form of optimism that the economy will bounce back.

“We believe that progress on negotiations should provide encouragement for investors to look through near-term tariff-induced economic weakness and toward a return to earnings growth in 2026,” the note said.

Previous bouts of elevated volatility in the stock market have proven to be great times for investors to hold their noses and buy stocks.

“High volatility has historically been followed by higher-than-normal returns,” Hoffman-Burchardi said.

When the VIX, also known as Wall Street’s fear gauge, surges above 40, forward one-year returns have, on average, been 30% with a 95% chance of positive returns.

That’s about triple the S&P 500’s average one-year return.

The VIX tagged 60 this week and traded at about 44 on Friday.

Additionally, bearish sentiment has soared based on the AAII Investor Sentiment Survey, which has historically been a solid buy indicator.

“Bearish sentiment has historically served as a contrarian indicator, with the S&P 500 averaging a 27% returns in the 12 months following instances where sentiment readings exceed 60%,” the note said.

Bearish responses from the AAII Investor Sentiment survey touched 62% last week, and were at 59% this week.

UBS kept its year-end S&P 500 price target at 5,800, but increased its downside scenario target to 4,500 from 4,000.

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