Just caught UBS's latest take on where US equities are headed, and it's worth paying attention to. Their strategists are pretty bullish on the outlook, arguing there's still meaningful upside potential over the next 12 months. Here's what caught my eye: they're forecasting S&P 500 profit growth of around 17% in Q1, which would mark the strongest earnings expansion we've seen since late 2021. That's a pretty significant number when you think about where we've been.

What's driving this earnings momentum? UBS points to two main factors. First, the US economy is holding up better than a lot of people expected, creating a solid foundation for corporate performance. Second, there's this AI infrastructure spending wave that's pushing semiconductor demand through the roof. Both of these are feeding into that robust profit growth across the market.

Interestingly, UBS also flagged that financial and materials sectors are likely to see above-average performance. The bank's pretty confident here, noting that "actual results are very likely to exceed expectations." That's a meaningful call when you think about earnings season dynamics.

One thing worth noting: the geopolitical noise around the Iran conflict hasn't shown up as a material headwind in earnings so far. That's probably a relief for a lot of market participants who were watching that situation closely.

So if you're tracking where corporate fundamentals are headed, this profit growth story is definitely one to follow. The combination of economic strength and AI-driven spending could keep pushing earnings higher, which would support the case for further upside in equities. Definitely something to keep an eye on as earnings season progresses.