Their base-case scenario for 2024 sees equities and bonds both delivering positive returns, as slowing U.S. economic growth, falling inflation and lower rate expectations drive yields down, which should support equities.

The absence of a severe U.S. recession should mean companies can continue to grow earnings, UBS said.

That scenario sees the S&P500 at 4,700 points at the end of the year, up from 4,502 as of Wednesday's close the U.S. 10-year yield at 3.5% - it was at 4.506% on Thursday - and the euro at $1.12 - last $1.085.

In addition, they expect geopolitics to play an outsized role in 2024 - "The U.S. presidential election, the ongoing Israel-Hamas and Russia-Ukraine wars, and the rivalry between the U.S. and China could all affect markets globally. Investors should prepare for bouts of politically driven volatility and consider hedges."

(Reporting by Alun John; Editing by Amanda Cooper)