JPMorgan has reaffirmed its overweight position on emerging markets and eurozone equities, citing strong earnings momentum, contained inflation and a softening US dollar as key supports for risk assets.
Mislav Matejka, head of global equity strategy at the bank, said the trade-off between growth and policy remained favourable despite persistent geopolitical tensions.
“Activity momentum is staying resilient,” he wrote in the bank’s February chartbook, adding that “earnings delivery appears to be accelerating and broadening”.
Initial fourth-quarter results have been encouraging, according to the note, with leading indicators pointing to further improvement.
Despite higher commodity prices and an uptick in capital spending, inflation is expected to remain well-behaved.
The US dollar, described as not cheap, is likely to remain on a depreciation path, which typically favours equities, especially in emerging markets. JPM reiterated its bullish stance on the asset class.
Eurozone equities have broken to new highs since early October, the bank noted, and the outlook remains constructive. The upgrade to overweight made at the start of the fourth quarter was reaffirmed.
Market leadership is broadening, with cyclical stocks, value shares and small capitalisation companies gaining ground. JPMorgan highlighted French banks as offering a potential catch-up opportunity.
Conversely, it maintained a negative view on software, media and business services, calling them “a lose-lose proposition”.