The market can best be described as being torn in different directions with the reasonably upbeat reporting season offset by fears of a global trade war and a spike in bond yields.
It's primarily fears of a trade war between China and the US following the resignation of president Donald Trump's pro-trade economic advisor Gary Cohn that was behind Wednesday's 1% drop in the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) to 5,902 points.
The good news is that UBS thinks the tug-of-war will be won by the bulls and that the top 200 index will finish the year up around 6.3% from here to 6,275 points. Once you add in dividends, total returns for investors should just about touch 10%.
Just be prepared for a more volatile ride compared to the perfect calm of 2017!
Of course, your chance of beating the index increases if you pick the right stocks. From this perspective, it is worth noting that UBS has added travel website operator Webjet Limited (ASX: WEB) and steel products maker BlueScope Steel Limited (ASX: BSL) to its model portfolio.
Webjet had delivered a market-beating first half result last month that has triggered a surge in its share price.
The stock still has plenty of room to climb as it is underperforming its peers like Flight Centre Travel Group Ltd (ASX: FLT) and Helloworld Travel Ltd (ASX: HLO), which have rallied 95% and 20% over the past year when Webjet is only up by 8%.
Not only did Webjet post very robust organic growth in total transaction value (TTV), it did so without sacrificing divisional TTV margin.
UBS is forecasting earnings per share (EPS) to grow by a compound annual growth rate (CAGR) of 17% over the next three years.
That puts the stock on a compelling valuation as Webjet is trading on a price-earnings (P/E) multiple of around 18.5 times. That's arguably too low given its profit growth profile.
BlueScope has also posted a very strong half year result in February that was 7% ahead of the broker's estimates.
"We think the under-appreciation of the ASEAN downstream business and the value of diversification will see BlueScope eventually trade ahead of steel peers," said UBS.
"BlueScope is trading on 6.0x FY18E EV/EBITDA [enterprise value to earnings before interest, tax, depreciation and amortisation] vs the global steel average of 6.8x. BSL is guiding a 25% H/H lift in underlying EBIT; we are forecasting in line with guidance."
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