A calmer global backdrop and improving signals from China are giving equity strategists at JPMorgan more reason to stay upbeat on risk assets.
In its November chartbook, the bank says the trade-off between growth and policy is “looking more supportive,” with moderating inflation and easing central banks creating room for equities to push higher.
Mislav Matejka, JPMorgan’s chief equity strategist, argues that activity momentum is picking up just as inflation pressures are cooling, helped by stable oil prices and slowing services costs.
That mix, he says, should keep bond yields subdued and support a gentler monetary stance through next year. The improvement in China’s outlook and a decline in trade tensions add to what he calls a “constructive” setup for global markets.
Against that backdrop, the bank remains overweight emerging markets versus developed ones, having turned positive on the asset class earlier this year after a long, cautious spell.
An improving wealth effect in China could spur more consistent demand, lifting not only miners but also other European exporters exposed to Asia.
JPMorgan also reiterates its upgrade on Eurozone equities from last month, saying the region finally looks set to break out of its sideways drift since spring.
The bank expects investors to begin rotating out of this year’s outperformers, defence stocks and banks, and into exporters, French equities and interest rate–sensitive sectors such as utilities and real estate.
Still, Matejka notes a few risks to watch: a sharper slowdown in the US labour market, froth in the artificial intelligence trade, and crowded investor positioning.
Even so, with policy easing in sight and growth stabilising, JPMorgan sees the balance of risks tilting firmly in favour of equities... and Europe’s long-awaited catch-up may at last be underway.