Should stock-market investors who 'missed the rally' buy now? Here's what UBS says

'Tactically, we are positive on stocks given strong economic growth, solid earnings, and low bond yields,' says UBS

Investors who are worried about having "missed the rally" in equities may still reap profits from buying now and seeking exposure to areas like midcap stocks in the U.S., according to UBS Group's global wealth-management division.

"Record highs tend to be followed by further positive momentum," UBS Global Wealth Management's chief investment office said in its 2022 outlook report Thursday. "Tactically, we are positive on stocks given strong economic growth, solid earnings, and low bond yields."

The S&P 500 index , which tracks U.S. large-cap stocks, has risen past a long stretch of peaks this year that has extended into November, according to Dow Jones Market Data. The index has returned an average 11.9% over the 12 months following a record high since 1960, UBS said in its report.

The U.S. stock market has skyrocketed from the pandemic-era trough in March 2020, sparking some nervousness among investors about stretched valuations and risks of a correction.

"For investors with excess cash to put to work, but who are still worried about the risk of bad timing, there are defensive approaches to entering the market that may help," UBS said in the report. "Investors can set a specific schedule to commit capital; write puts (if they are able to) in order to earn a premium and potentially buy on dips; or invest in a dynamic asset allocation that adjusts equity risk exposure systematically to help manage the risk of significant declines."

Put options give holders the right to sell stocks at a fixed price by an agreed upon date, with the put holder poised to profit when the price of the underlying stock declines. The buyer pays a premium to the writer of the put option.

"With economic growth likely to remain strong in the first half of 2022, we see Eurozone and Japanese equities, U.S. mid-caps, global financials, commodities, and energy equities as beneficiaries," UBS said in the report.

U.S. midcap stocks provide investors "a balance between cyclical and quality exposure, which we think is attractive at this point in the cycle, as we transition from high to slower growth," said UBS. Stocks in the Russell Midcap Index "are outpacing large-caps in terms of earnings growth, while trading at a roughly 20% valuation discount--the largest in 15 years."

The iShares Russell Midcap ETF $(IWR)$ has gained almost 23% this year, compared with the S&P 500 index's rise of about 25%, according to FactSet data, based on Thursday afternoon trading.

"We expect reopening dynamics to continue to drive returns at the start of the year as excess consumer savings are spent," UBS said in its 2022 outlook report. "As the year progresses, we think business spending will play a larger role in driving returns, as companies expand capacity, restock inventories, and target increased market share."