Key Takeaways
- JPMorgan recommends investors with medium-term outlooks capitalize on market downturns
- Strategist Mislav Matejka cautions against adopting pessimistic positions amid geopolitical uncertainty
- Earnings forecasts for the S&P 500 continue their upward trajectory
- JPMorgan favors global equities, emerging markets, smaller companies, and value-oriented stocks
- The financial institution highlights key differences between current conditions and the 2022 environment
In a research report released Monday, JPMorgan encouraged market participants to view fresh bouts of weakness as strategic entry points. The financial institution contends that the fundamental ingredients for a sharp rebound are already present.
Mislav Matejka, who oversees European equity strategy at JPMorgan, authored the analysis. He advised that those operating with a three-to-twelve-month investment window should increase their market exposure during downturns rather than retreating to the sidelines.
Matejka acknowledged current geopolitical headwinds, including tensions surrounding the Strait of Hormuz and continuing complications involving Iran. While recognizing that armed conflicts generate market turbulence, he contended that maintaining an overly defensive posture carries substantial opportunity costs.
According to JPMorgan’s assessment, pessimistic sentiment had solidified as the prevailing market view roughly two to three weeks after hostilities escalated. Oil prices were anticipated to surge dramatically, prompting investors to significantly trim their equity allocations.
The bank identified this configuration, paired with technical indicators showing oversold conditions, as the ideal moment to increase positions. JPMorgan initially issued this recommendation on March 23.
Contrasting Today’s Landscape With 2022
Matejka outlined several critical distinctions between the present economic backdrop and conditions that prevailed in 2022. Inflationary forces are substantially more contained, businesses possess diminished ability to raise prices, and compensation increases are being restrained partly through artificial intelligence implementation.
Actual interest rates and employment dynamics also diverge significantly from the 2022 period, when pandemic-related disruptions intensified inflation control challenges. Given these factors, JPMorgan is advocating for long-duration investments that exhibit sensitivity to borrowing cost fluctuations.
The institution expects monetary authorities to tolerate an anticipated 1.5 percentage point acceleration in annual inflation metrics. Matejka stressed that inflation expectations remain firmly anchored and shouldn’t drift materially higher.
Projections for S&P 500 earnings per share in 2026 have maintained their upward momentum. The ISM manufacturing index, a key barometer of US economic activity, has reached levels not seen in three years. European corporate earnings growth could hit 18.2% during the current calendar year.
Citigroup’s Economic Surprises Index also registers decidedly positive readings at present, the report noted.
JPMorgan’s Preferred Investment Areas
JPMorgan anticipates that international equities and developing market stocks will reclaim their leadership over American shares. The bank also expresses preference for smaller capitalization companies and value-oriented investments relative to growth stocks.
Prior to the Iran-related turmoil, foreign stocks had already established an 11% performance advantage over US markets. JPMorgan forecasts this pattern will reassert itself during the latter half of 2026 as military confrontations subside and the dollar’s safe-haven appeal diminishes.
Developing market stock valuations continue trading at a 34% markdown compared to developed nation equities. MSCI Europe currently trades at 14 times projected 2026 earnings, while the S&P 500 commands a 19.5 multiple.
Matejka predicted that capital flows into emerging markets, which paused during the conflict period, will recommence. The bank’s comparative performance analysis suggests fresh record highs could materialize in the year’s second half.
