The S&P 500 could surge 18 percent this year, according to UBS, which raised its 2018 target to 3,150, the highest on Wall Street, only three trading days into the year.

The Dow Jones industrial average already crossed 25,000 on Thursday morning after a strong jobs report. The broader S&P is trading around 2,726 on Thursday after rising nearly 20 percent last year.

The S&P 500’s gain on the year will be 17.8 percent according to the new UBS target and based on the benchmark’s closing value of 2017. Taking into account the rally to start 2018, the index will rise 15.5 percent from here, according to the UBS target. The firm’s previous 2018 forecast for the S&P 500 was 2,900.

Tax cuts for corporations will fuel earnings growth and were the reason for the more upbeat forecast, UBS analysts said in a note Thursday. They raised their S&P earnings-per-share forecast for the year to $157, which would be an 18 percent year-over-year gain.

About half (8.5 percentage points) should come from pretax income growth, the analysts said, while the tax plan will add another 7.2 percentage points to that and share buybacks and merger activity will make up another 2.5 points.

“We see corporate spending picking up, particularly around productivity, benefitting from lower taxes and a potential pick up in aggregate demand,” Keith Parker, head of U.S. equity strategy, wrote in the Thursday note. “At the same time, we expect consumer spending to remain solid, though the drop in the savings rate remains a concern for us.”

— CNBC’s Patricia Martell contributed reporting

Source: Investment Cnbc
UBS raises 2018 S&P 500 forecast just three trading days into the year, now sees 18% surge