The strong upward trend in U.S. stocks is forcing one of Wall Street's biggest bears to shift to a more positive tone.

Since October 2022, strategists at JPMorgan have been bearish on U.S. stocks. However, according to a report released Tuesday by the bank's Chief Global Equity Strategist, Dubravko Lakos-Bujas, this situation appears to be changing.

Although Lakos-Bujas did not update JPMorgan's year-end target price for the S&P 500 of 4,200 points (which implies a significant 27% decline from the current level), he did advise investors not to be so bearish on the market.

"We are adjusting our view to be more constructive on defensive stocks and less bearish on cyclical stocks," Lakos-Bujas said.

The factors driving Lakos-Bujas' change in sentiment include the Federal Reserve's interest rate cuts and China's introduction of new stimulus measures.

"Policy support from the world's largest economies (China and the United States), coupled with unexpectedly resilient U.S. economic growth, a tight labor market, ongoing government deficit spending, and record highs in stocks, credit, and housing markets," Lakos-Bujas said.

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The bank also noted that the health of U.S. consumers is good, as their wealth has increased by a total of $50 trillion since the COVID-19 pandemic.

According to data from the Federal Reserve, U.S. consumers have about $185 trillion in assets, which are mainly composed of stocks, bonds, homes, and cash, with only $21 trillion in debt. This is a healthy balance sheet.

The outlook for corporate earnings growth also inspires Lakos-Bujas, who expects corporate earnings growth to accelerate from 3% over the past two years to 12% over the next two years.

"U.S. companies are increasingly focusing on using pre-tax income for investment spending rather than returning after-tax profits to shareholders through buybacks, which also helps to stimulate the economy," Lakos-Bujas explained.This is driven to some extent by the AI boom, with large technology companies expected to accelerate their R&D and capital expenditure investments, exceeding $500 billion annually.

Lacoste-Bujas noted, "These drivers are helping to offset the weakness of macroeconomic imbalances."

"While it is too early to conclude that this is a turning point, it does indicate that a recession is unlikely in the short term, especially with unexpectedly strong job growth and a decline in unemployment rates that breaks the trend of a slowing job market," he said.

However, Lacoste-Bujas is not entirely bullish on U.S. stocks. The strategist warned that the presidential election in November could bring volatility to the market, depending on the election results, and that a decrease in interest rates could have a negative impact on corporate profits, particularly in the financial sector.

On Wednesday, the three major U.S. stock indices closed higher, with the S&P 500 and Dow Jones Industrial Average setting new record highs. This followed the release of the latest meeting minutes by the Federal Reserve. The market is awaiting the release of U.S. inflation data for September and the start of the earnings season.

As of Wednesday's close, the S&P 500 had risen by 0.71%, to 5792.04 points. Statistical data shows that this is already the 44th time this index has set a new historical high this year.

With the Federal Reserve initiating a rate-cutting cycle, increasing the likelihood of a soft landing for the U.S. economy, Wall Street's optimism towards U.S. stocks is growing. Previously, Goldman Sachs strategists raised their year-end target for the S&P 500 for the third time this year, now expecting the index to close at 6000 points by the end of the year, making it the second-highest target given by Wall Street strategists.