In terms of sector themes, JP Morgan is sticking with “the cyclicals”, arguing the backdrop for 2026 looks increasingly supportive as the growth–inflation trade-off improves.
The American bank, in its latest strategy view, said it expects cyclical sectors to outperform within a constructive equity outlook, helped by what it sees as ongoing Value leadership in international portfolios and a tilt toward exporters.
JP Morgan analysts reckon global earnings could accelerate from the current 10–12% pace, which would particularly benefit cyclicals given their higher operating leverage. In a note, analysts said cyclical earnings have lagged defensives for several years, but an inflexion point “could be upon us”, with cyclical profit margins still subdued versus defensives in a pattern it compares to post-recession periods.
The core macro call is for inflation to trend lower, driven by softer wage pressures, decelerating services prices and medium-term downside risk to oil if geopolitical tensions ease.
JP Morgan adds that if bond yields rise, it is more likely to be for “the right reasons”, stronger growth, and it highlights a strong positive correlation between cyclical relative performance and the direction of yields.
In sector calls, it remains bullish on semiconductors within Technology, stays positive on Capital Goods, reiterates an overweight on miners and construction, and says to fade the bounce in energy equities, particularly outside the US.
Banks are seen as attractive leverage to an activity upcycle, despite slowing EPS momentum after a strong run. In consumer cyclicals, JP Morgan likes luxury and has upgraded autos after years of underweight.
On defensives, it is cautious on most areas, flagging healthcare as the preferred shelter.