JPMorgan is maintaining a bullish stance on equities for the second half of the year, arguing that a variety of current worries - from geopolitics and inflation to concentration risk and the direction of the economic cycle - are unlikely to derail further gains. The bank’s strategists said they expect major equity indices to be producing fresh all-time highs in 2H and that additional upside remains likely.
Below the headline indices, JPMorgan has been tracking a shift in market leadership toward a broader group of stocks. Over the last two months the bank has emphasised an ongoing rotation and widening of market participation, and it expects that trend to continue into the remainder of the year. In particular, strategists signalled a rebound in momentum trades and identified semiconductors as an area showing renewed strength, while noting that technology as a whole is not forecast to be the standout performer in 2H as it was last summer.
Despite the positive outlook, the strategists warned that elevated volatility is likely to remain a feature of markets, with periodic concerns about corporate profitability expected to resurface from time to time. They contrasted the current environment with 2022, saying they do not see mounting inflationary pressure that would require central banks to adopt a more aggressive stance. On the labour-market front the team described the picture as mixed, pointing to data that suggests softer sentiment around jobs.
The strategists argued that softer labour-market indicators could produce a so-called "bad is good" dynamic for equities: weaker employment signals reduce the likelihood that the Federal Reserve would need to tighten policy further to cool an overheating economy. A weaker dollar was also identified as a positive force, particularly for international stocks.
The bank’s note included a snapshot of market moves: NDX +1.19%, UK100 -0.13%, US500 +0.62%, KS11 +0.65%, STOXX 0.00%, CSI300 +0.16%, with separate mention of the Nasdaq 100 in its market commentary.
JPMorgan said that the second-quarter earnings season had been comforting for investors, with both the U.S. and Europe posting year-over-year earnings-per-share growth above 20%. That result reinforced the bank’s prior view that corporate fundamentals were holding up as growth resumed.
The strategists revisited a recommendation made two months earlier for a pause in beta and a short-lived rebound in low-volatility stocks. They characterised the rotation into defensive areas such as healthcare and consumer staples as likely tactical in nature - expected to last a few weeks rather than extend through the second half. The team continues to expect beta to resume its rally, noting that low-volatility groups have already begun to roll over again.
JPMorgan also pointed to the shape of the yield curve as supportive of cyclical sectors. A steepening curve was described as an additional tailwind for cyclical names, and the bank highlighted banks, mining, industrials and consumer cyclicals as particularly attractive, alongside an expectation that the semiconductor trade will stabilise.
"If the macro outlook we envisaged for 2H keeps gaining traction, that should be supportive for further equity upside, but also for more of a high beta outperformance," the strategists wrote, framing a scenario in which improving macro momentum would favour cyclical and higher-beta stocks.
Bottom line: JPMorgan retains a constructive equity view for the second half, expecting indices to push to new highs and for market breadth to expand. The bank sees cyclical sectors and semiconductors as beneficiaries if the projected macro path unfolds, while cautioning that volatility and recurring profitability concerns are likely to remain.