US Market Thematics Specialist Sales Commentary

Small-cap equities have significantly outperformed the S&P 500, but this trend diverges from fixed income markets which are pricing in aggressive Fed tightening. This performance is currently supported by AI infrastructure investment and lower oil prices, though the entry point is tactically stretched.

Key Takeaways

• 1.There is a significant divergence between equity markets, which have moved ahead, and fixed income, which continues to price a hawkish Fed.
• 2.Small cap outperformance is being driven by the search for opportunities outside of tech and a recent decline in oil prices.
• 3.The market is currently pricing in 37bp of tightening by end-of-year 2026, a significant increase from May expectations.

Table of Contents

• JPM | US MACRO THEMATICS - Equities and Fixed income are making different assumptions about the Fed
• Current CTA Levels
• JPM Global Macro Research
• J.P. Morgan - Market Strategy & Macro Contacts

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