Three scenarios for markets, S&P 500 at 4,800 and Brent at $105 by end-2022 in central case – UBS

Economists at UBS detail three scenario analyses for markets. With military outcomes and political motives likely to remain opaque, they believe it is more practical to focus attention on the potential impact of the war and sanctions on commodity prices, which are visible and have a direct impact on economies around the world.

Central scenario

“We would expect sanctions to contribute to the gradual removal of Russia from global energy supply chains, rather than forcing an immediate halt to energy flows. Our Brent crude forecasts, in this case, are $125/bbl for June, $115/bbl for September, and $105/bbl for December.”

“Broadly stable corporate earnings expectations and falling geopolitical risk premia mean that in this scenario, we would expect markets to move higher by year-end. Our S&P 500 target for this scenario is 4,800 by the end of 2022, around 10% above today’s levels.”

Downside scenario

“Oil prices could rise above $150/bbl and gas could need to be rationed in Europe.”

“Lower corporate earnings expectations and a still-elevated geopolitical risk premium would mean global markets would likely move lower. Our S&P 500 target for this scenario is 3,700, around 15% lower than current levels.”

Upside scenario

“With consumer spending on services still expected to rebound because of the lifting of omicron-related restrictions, global growth should be robust in this scenario. Provided inflation also reduces over the course of the year, we believe the S&P 500 could end the year at 5,100 in this upside scenario, around 17% higher than current levels.”