This Out-of-Favor Stock Market Strategy May Be Gaining Traction Now That Trade Deals Are Being Finalized

About a month after “Liberation Day,” when the U.S. announced sweeping new tariffs on Chinese goods, much of the anxiety surrounding those tariffs has already subsided. Both the U.S. and China have since scaled back most of the measures, making the initial shock seem like a thing of the past.

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But, according to UBS strategists led by Sean Simonds, the focus in markets is shifting. While the earlier concern was about policy uncertainty—what rules would be implemented and how far they would go—investors now face a new kind of ambiguity: policy outcome uncertainty. In other words, the market now has more clarity on the policies themselves, but much less clarity on what those policies will actually do to the economy.

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UBS notes that although the details around tariffs and trade measures have become clearer, the real unknown is how these policies will affect growth and corporate performance. The UBS team had built their economic outlook assuming a baseline of 10% across-the-board tariffs and 60% on Chinese imports. While actual China-specific tariffs have turned out to be about half that rate, sector-specific tariffs still suggest that UBS’s assumptions were a fair starting point.

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Based on this model, UBS expects the U.S. economy to slow substantially. They forecast GDP growth to decline from 2% in the first quarter of the year to just 0.7% by the final quarter. While volatility and risk levels remain elevated, they are difficult to quantify.

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UBS believes this calls for a strategy that balances caution and opportunity. Specifically, they advocate for a value-conscious approach, steering clear of overvalued stocks while still maintaining exposure to cyclical growth companies that could benefit if economic momentum continues into 2026.

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So how should investors position themselves? UBS suggests focusing on Growth At a Reasonable Price (GARP)—a hybrid strategy that blends elements of both growth and value investing. Although GARP has lagged the broader market in recent years, particularly underperforming the S&P 500 across multiple time frames, UBS believes this approach may be due for a resurgence. As valuations normalize and the economy goes through key transitions, GARP strategies could become more appealing.

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UBS has identified 29 stocks that meet their strict GARP criteria. These companies trade at an average of 30 times estimated 2025 earnings and are expected to deliver an average 19% return based on UBS analyst forecasts.

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All of the selected firms rank in the top half of the market in terms of operational quality and the top quarter in terms of growth potential. They also meet key valuation thresholds, avoiding overpriced names or value traps, and all have market capitalizations above $10 billion.

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Among the highlighted companies are well-established players like Broadcom and Eli Lilly, as well as lesser-known firms like On Holdings, the Swiss sneaker brand endorsed by tennis legend Roger Federer. The list also includes companies from a variety of sectors—technology, pharmaceuticals, insurance, capital goods, consumer services, and financials.

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Some notable names and their stats include:

• Broadcom (AVGO): Trades at 32x 2025 earnings; down 10% YTD
• Eli Lilly (LLY): At 53x forward PE; down 2%
• Salesforce (CRM): 28x forward PE; down 16%
• Intuit (INTU): At 34x forward PE; up 5%
• Booking Holdings (BKNG): Trading at 24x; up 4%
• Progressive (PGR): Relatively cheap at 18x PE; up 21%

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Others include Arista Networks, Autodesk, Chipotle, Hilton, Equinix, Cintas, Kinsale Capital, and Tradeweb Markets. Notably, these stocks balance high-quality operations with solid growth trajectories, while not being overpriced relative to their future earnings potential.

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On the macro side, the market is showing strong momentum today. Futures on the Dow Jones Industrial Average are up nearly 1,000 points, with similar rallies in S&P 500 and Nasdaq 100 futures. The S&P 500 is gaining nearly 3%, while Nasdaq 100 futures have surged nearly 4%.

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Meanwhile, gold prices are falling sharply, dropping over 3.5%, and yields on the 10-year Treasury note have climbed by 4 basis points, now sitting at 4.44%.

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All told, the market appears to be moving beyond its initial panic over tariffs and policy shifts, now grappling with the more nuanced question of how these policies will play out in real economic terms. As investors try to gauge what lies ahead, UBS’s view is that blending growth and value strategies through a GARP lens may offer the best route forward.

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