UBS’s Baweja warns of margin pressure risk for stocks in 2027

Enjoy the rally while it lasts. That’s essentially the message from Bhanu Baweja, chief strategist at UBS Investment Bank, who sees strong US earnings growth pushing stocks higher in the near term before the picture gets considerably murkier heading into 2027. Baweja’s thesis is straightforward: corporate margins, the engine behind much of the post-pandemic equity surge, face mounting pressure as the calendar flips to next year. The result could be a stalling in returns that catches complacent investors off guard. The case for near-term optimism, and the cliff after it Back in January 2026, he described the year ahead as one that would deliver “decent returns but more mediocre returns” compared to what investors had grown accustomed to. Not a crash call. Not a moonshot prediction. Just a realistic assessment that the easy money phase of the cycle was winding down. By April, his tone had shifted further toward caution. He explicitly encouraged investors to “play defense” in equity markets, citing geopolitical uncertainties as a primary concern. The most recent layer of his analysis zeroes in on margins. Strong nominal growth has been the dominant force propping up markets, but Bawej...