UBS downgraded U.S. equities to Neutral from Attractive on Tuesday, citing diminished upside potential after a sharp rally in stock markets fueled by the U.S.-China tariff truce. The call comes as the S&P 500 surged 11% since early April, including a 3.3% gain on Monday, after both countries agreed to slash tariffs for 90 days.

Highlights from UBS’s Note

New Rating: Neutral (downgraded from Attractive)

Reason: “Risk-reward in equities is now more balanced.”

Tariff Pause Impact: “The pace and scale of tariff reductions exceeded expectations.”

UBS originally upgraded U.S. equities on April 10, arguing that markets had overpriced trade pessimism. Now, with the U.S. tariff on China cut to 30% from 145% and China’s levy on U.S. goods down to 10% from 125%, the firm believes “the easy gains are behind.”

Not a Bearish Call
Despite the downgrade, UBS was clear:

“This is not a bearish view, nor a call to sell equities.”

Instead, the bank views the move as a recalibration amid high uncertainty around the next phase of trade negotiations. It continues to recommend a full strategic allocation to U.S. stocks and expects higher prices 12 months from now.

Sector Preferences Unchanged
UBS maintained Attractive ratings on:

Communication Services

Technology

Health Care

Utilities

Investor Angle
As markets digest the rally, real-time index tracking tools like the S&P 500 Constituents API can help investors monitor shifts within key sectors UBS favors. This API provides up-to-date data on all 500 stocks in the benchmark index.

Looking Ahead
While UBS steps back from its bullish call, its longer-term view remains constructive. The focus now turns to:

Whether the 90-day tariff reprieve turns into a permanent agreement

How corporate earnings and Fed policy interact with trade progress

If sector rotation favors defensive plays or remains tech-driven

In the meantime, UBS advises investors to stay invested—but brace for higher volatility.