When markets refuse to wobble, investors start eyeing the exits.
Since early April, the MSCI World (MXWO) hasn’t suffered a pullback bigger than 2.5%, and JPMorgan’s equity strategists say nerves about an overdue stumble are understandable, but not a reason to bail out.
They list the usual suspects: crowded positioning, froth around the artificial intelligence trade, and a yawning gap between racy “high beta” shares and bond yields.
Credit spreads are tight and a few headlines have jarred, but the bank does not spy a systemic problem; corporate and bank balance sheets look sturdy.
Labour data are mixed, job-cut announcements up, some surveys soft, yet jobless claims remain calm, and the latest US payroll proxy beat gloomy expectations.
With inflation subdued and Brent crude contained, any rise in bond yields should not be for the “wrong” reasons, and central banks are likely to stay dovish.
Put together, JPMorgan does not expect any de-risking to snowball.
Activity data are improving: Eurozone business surveys have nudged to year-highs, US services new orders have perked up and China’s growth forecasts have been revised higher.
Seasonality now helps, buy-backs are resuming as blackout periods end, and a legal reversal of recent US tariffs, if it happens, would be a tailwind for risk assets.
Strategy-wise, JPM keeps an overweight (OW) stance on emerging markets (EM) over developed markets (DM), and has turned more positive on the Eurozone.
If AI momentum stalls, overseas bourses should prove more insulated: AI names are almost half the US market and roughly 30% in Japan, versus lower exposure (and cheaper valuations) across EM.
Within Europe, sector leadership has wobbled: banks and defence have paused, and JPMorgan thinks rotation towards laggards, notably exporters that trail domestic plays this year, has more to run.