JPMorgan's equity strategists are advising investors to increase exposure to stocks when prices dip on geopolitical headlines, arguing that the recent sell-off tied to the Middle East conflict represents an investment opportunity rather than grounds for a sustained bearish view.
Led by Mislav Matejka, the team remains constructive on equities despite a sharp V-shaped recovery in global markets since the onset of the Iran-related tensions. They recommend using any further weakness driven by conflict-related news to add to positions.
The strategists point to a set of military, political and economic limits that they believe make a prolonged confrontation unlikely. They also stress a clear difference between the current environment and the inflation shock that prompted aggressive central bank tightening in 2022.
A central element of their case is the trajectory of wage growth and inflation. Entering 2022, the Atlanta Fed Wage Growth Tracker was running above 6% and climbing, a dynamic that forced policymakers into significant rate increases. By contrast, the strategists note wage growth has been trending lower for several quarters and is now closer to 4%.
Policy rates, the report adds, are broadly aligned with historical norms. The strategists point to the European Central Bank operating at what they consider a neutral rate and to the Federal Reserve holding policy at 3.75%.
"We continue to argue that the rate hike pricing that built up during the conflict is likely unwarranted," the strategists wrote.
"It is very hard to believe that central banks would tighten into a geopolitically driven energy supply shock that is clearly growth-bearish. Any early hikes would likely be viewed as a policy mistake, and the risk of a policy reversal thereafter would increase," they added.
Earnings momentum is cited as another pillar supporting their positive stance. For the MSCI Eurozone, consensus forecasts show 2026 EPS growth at approximately 19%, with upgrades broadly distributed across industrials, financials and materials. At the global level, the strategists note MSCI emerging market consensus EPS growth for 2026 is projected at 45%, while the S&P 500 is expected to see earnings growth of around 20%.
On the question of market leadership, JPMorgan does not anticipate a repeat of last year's concentrated rally dominated by AI-related names. The strategists expect leadership to broaden and for this cycle not to mirror the previous year's pattern.
That said, the team retains a constructive stance on large technology winners and continues to overweight semiconductors. They expect the next leg of gains to be fueled by a wider range of sectors and regions, including value stocks and small-cap companies. This broader advance, the strategists argue, should be supported if the dollar resumes weakening and bond yields fall.
Regionally, JPMorgan is maintaining an overweight on emerging markets for a second year running. The bank highlights attractive valuations - a roughly 38% forward price-to-earnings discount to developed markets - alongside improving fundamentals and relatively light investor positioning as reasons to favor the asset class.
Bottom line - JPMorgan's equity strategy team urges investors to view conflict-related volatility as an opportunity to add risk, supported by a softer wages backdrop, policy rates near neutral, and solid earnings growth forecasts across regions and sectors.