Markets have shrugged off rising bond yields, higher energy prices, and geopolitical uncertainty to keep climbing, according to a new note from UBS, the Swiss banking giant, which is maintaining its Attractive rating on global equities.
The bank's Chief Investment Office says resilient economic growth, solid corporate earnings, and accelerating artificial intelligence (AI) investment are enough to sustain the rally, even as further Federal Reserve tightening creates bouts of volatility.
The bank identifies AI as the dominant driver of global earnings growth, with rising spending on data centres, semiconductors, cloud infrastructure, and power capacity underpinning its bullish stance.
Hyperscalers, a term for the largest cloud computing providers, have maintained aggressive capital expenditure plans and are starting to see increasing returns on those investments, UBS says.
The bank has set a June 2027 target of 1,510 for the MSCI All Country World Index (ACWI), a broad measure of global stock market performance, up from 1,359 at 14 September 2026.
UBS also continues to see further upside for the S&P 500 index through the middle of next year.
In Europe, UBS sees the region at the start of a cyclical earnings recovery after several years of stagnation, supported by investment linked to AI, electrification, defence spending, and reshoring.
The bank is forecasting 15% earnings growth for the Eurozone in both 2026 and 2027, despite recent market weakness driven by energy price concerns, higher interest rates, and widening sovereign spreads.
Across Asia and emerging markets, higher oil prices, elevated bond yields, and a stronger US dollar have weighed on sentiment, though UBS argues valuations already reflect much of that pessimism.
Taiwan and Japan are highlighted as beneficiaries of the AI semiconductor and hardware supply chain, while Japan and Singapore are also seeing improving shareholder returns as part of wider corporate reform programmes.
Investors should expect periodic volatility as markets digest the rate environment and geopolitical tensions, the bank adds, with rapidly shifting sentiment around AI returns representing an additional risk factor.
In a downside scenario, a sharp decline in AI capital expenditure combined with geopolitical turmoil and sticky inflation could push the MSCI ACWI to 990 by June 2027.
The upside scenario, which assumes an accelerating AI productivity boom, geopolitical de-escalation, and a lower effective US tariff rate, points to a target of 1,670.
