Global Markets Strategy Equity Strategy

J.P. Morgan analysts anticipate a broadening of equity market participation in the second half of 2026 as stagflation fears fade. They recommend overweighting EM and cyclical sectors while cautioning on AI-at-risk groups.

Key Takeaways

• 1.Expect rotation and broadening of market participation in 2H 2026, driven by an unwind of stagflation fears.
• 2.Bullish on Emerging Markets (EM) vs Developed Markets (DM) for 2026, citing improved outlook and light positioning.
• 3.Maintain overweight in Cyclicals and Basic Resources; suggest adding to semiconductors on recent weakness.

Table of Contents

• Equity Strategy
• Table of Contents
• Rotation and broadening is on the cards for 2H
• International stocks to benefit from the removal of conflict headwinds
• AI not to be the only story in town in 2H
• Given the strong run for MSCI World, is the complacency obvious?
• Equities are beating cash, bonds and credit so far this year
• Economic, political and military considerations continue to argue against the conflict re-erupting in 2H
• Defense sector is not working
• Cyclicals have been performing well this year
• Equity sensitivity to oil
• Are central bank hikes really needed when CPI is set to start falling soon?
• USD acts as a “safe haven” during conflict
• Regional Allocation
• Themes and Baskets
• Sector Allocation
• Technical Indicators
• Equity Flows
• Sector Valuations

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