UBS has raised its year-end forecast for one of the most tracked and invested global stock market indexes, implying 6% upside potential from current levels.
The MSCI All Country World index prediction was lifted to 830 from 800 on Tuesday by the equity strategists at the Swiss bank, citing seven key reasons.
These include improving equity risk appetite and the market "reacting positively to weaker data", with slowing US wage growth that "indicated the inflation shock is temporary" and historical data suggesting that equities react strongly following a Fed pause.
There is also optimism that artificial intelligence can push up productivity growth, equities are "still modestly cheap", with the earnings forecasts now in line with expectations.
While an unusual occurrence, there is scope for a "defensive-led bull market", strategist Andrew Garthwaite said.
"We have six out of the eight preconditions for entering a bubble that we are not in," he said, helped by "some signs that G4 central bank balance sheets are stabilising and retail buying".
Risks on the downside are that profit margins are "abnormally high, but there are good idiosyncratic reasons why macro models temporarily don’t work (namely, tech and energy which supply 65% of the margin improvement are less sensitive to unit labour costs and rates than GDP profits)".