JP Morgan said the recent equity wobble should be short-lived and advised investors not to chase the sell-off sparked by higher oil prices and bond yields.
Brent crude's move above $100 a barrel and rising yields finally dented a market that had stayed resilient, though the bank said oil's next move will drive near-term risk appetite.
MSCI World is still up 11% this year even as yields have climbed 80 basis points, and JP Morgan said stocks can keep absorbing higher rates while earnings remain robust.
The bank warned that cushion narrows as the US 10-year yield approaches 5% to 5.5%, but said a Fed rate increase this week could calm markets more than a pause.
Looking ahead to October, JP Morgan expects third-quarter earnings to reassure investors and said the backdrop still favors cyclical and value shares over growth.