Markets may have regained some ground after the spring’s tariff turmoil, but investors should not assume the worst is over, JPMorgan has warned.
The bank highlights a worrying split between "hard" data, such as retail sales and industrial production, which has stayed resilient, and "soft" data from consumer and business surveys, which is turning sharply lower.
Historically, such a divergence has often signalled trouble ahead.
Labour market indicators are flashing warning signs. Consumer surveys now point to potential payroll declines for the first time since 2010, once COVID distortions are removed.
Challenger job cuts are rising to recessionary levels, inflation expectations are climbing, and weekly earnings revisions have fallen to lows last seen during the pandemic.
While markets have recovered as tariff threats have been watered down, JPMorgan argues that lasting damage may already be done. Even a partial implementation could see tariff rates rise seven to ten times higher than during the 2018 trade battles, which triggered market declines globally.
The US investment bank's 2025 outlook had forecast a weak first half for equities, followed by a better second half once trade uncertainty eased. The bank still advises caution, suggesting investors should wait until hard data softens, earnings expectations are reset, and tariff policy becomes clearer.
International markets are starting to look more attractive than the US, where equities still dominate global indices at an unusually high level. JPM notes that American stocks now account for over 70% of global market weight, compared to less than 50% fifteen years ago.
For UK investors, the advice is simple: stay patient. The economic damage from higher tariffs may take time to show up, and equity markets could face further pressure before the path higher becomes clearer.