The brokerage, which raised its rating on global equities to “neutral” from “least preferred” and gave preference to emerging markets over their US counterparts, considers a recession in the US as less likely.

It expects global earnings to be flat this year and rise by the mid-single digits globally next year.

“This profit cycle has been very different from previous ones. Rising inflation has supported nominal growth, while volumes have already been under pressure. As such, nominal earnings have held up much better than expected,” UBS said.

The MSCI All Country stock index has risen 10.2% for the year after a 19.8% fall in 2022.

Among sectors, UBS moves its preference for Energy over Materials and shifts Communications to “neutral” from “least preferred”.

The brokerage has kept the US in its “least preferred” list, pointing to the region’s high valuations despite earnings delivering positive surprises. However, it cut Australia to “neutral” as the earnings outlook has failed to improve, with next year’s profit growth expected to be negative.