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(Bloomberg) -- The outlook for US equities is improving as trade tensions with China ease, though pricing is already looking optimistic given lingering uncertainties, according to Goldman Sachs Group Inc. strategists.

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A team led by David Kostin lifted their three-month target for US equities to 5,900 — or a gain of less than 1% from current levels, implying that the recent advance is set to stall.

The upgrade follows Monday’s rally on Wall Street after negotiators from the world’s two largest economies agreed to temporarily lower tariffs, with traders betting that a US recession can be avoided. Goldman remains cautious, however.

“Already-optimistic market pricing of the economic growth outlook as well as uncertainty surrounding the magnitude of impending slowdown in economic and earnings growth will likely keep a ceiling on equity multiples during the next few months,” the strategists wrote in a note.

The team sees the S&P 500 Index reaching 6,500 in the next 12 months, up from 6,200 previously. The new estimate implies a gain of about 11% from Monday’s close.

Goldman cut its S&P 500 forecasts twice in March, citing higher recession risk and tariff-related uncertainty. The strategists said that while such concerns have eased with the agreement between US and China, and Big Tech stocks should especially recover, the broader earnings outlook is uneven.

“Despite the recent improvement in the growth outlook, tariff rates will likely be substantially higher in 2025 than they were in 2024, putting pressure on profit margins,” they wrote. The team recommends investors focus on shares of companies with high pricing power that can maintain margins amid elevated input costs.

In a separate note, another team of the bank’s strategists led by Christian Mueller-Glissmann said the risk of a continued equity rally from here has moderated materially, pointing to worsening risk-reward potential for equities. The probability of another correction has declined but risks for the business cycle are skewed negatively into year-end, they said.

Meanwhile, UBS Global Wealth Management’s chief investment officer Mark Haefele downgraded US stocks to neutral from attractive, saying the risk-reward was more balanced after the strong rebound from April lows.