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Investors should continue to treat geopolitically driven market weakness as a buying opportunity, according to JP Morgan’s equity strategy team, which says the conditions that previously argued against a prolonged conflict-driven selloff remain in place.
Strategist Mislav Matejka, who in March urged investors to add on dips after the initial derisking phase, said central bank flexibility and supportive earnings momentum distinguish the current environment sharply from 2022, when rising rates compounded equity market pain.
JP Morgan also noted that the MSCI World index has already staged a V-shaped rebound. While the bank acknowledges the risk that adverse geopolitical headlines could trigger additional volatility, it argues that military, political and economic constraints reduce the likelihood of a prolonged confrontation.
In JP Morgan’s view, the more pressing question is whether leadership will broaden as the market moves into the summer.
The bank said it does not expect a repeat of last year’s pattern, when Nvidia rallied 120% in the six months following the Liberation Day moves and the Magnificent Seven technology stocks dominated returns. JP Morgan pointed to constraints from tariff headwinds and earnings disappointments in China and Europe.
This time, JP Morgan expects broader participation, citing signs that Magnificent Seven price-to-earnings multiples relative to the wider market had fallen to their lowest level in a decade before the recent recovery. The bank also said AI-exposed stocks had derated to record lows, which it believes could set up potential short squeezes.
JP Morgan further flagged that the dollar and bond yields have lagged the equity rebound so far, and could catch up, providing an additional catalyst for market moves.
The bank reiterated its overweight stance on emerging markets versus developed markets and maintained a constructive view on semiconductors.
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