Investors should continue using geopolitically driven market weakness as a buying opportunity, according to JP Morgan's equity strategy team, which says the conditions that argued against a prolonged conflict-driven selloff remain firmly in place.
The bank's strategist Mislav Matejka, who called in March for investors to add on dips following the initial derisking phase, says central bank flexibility and supportive earnings momentum distinguish the current environment sharply from 2022, when rising rates compounded equity market pain.
With the MSCI World index having staged a V-shaped rebound, JP Morgan acknowledges the risk of adverse geopolitical headlines causing further bouts of volatility, but argues that military, political and economic constraints all limit the likelihood of a prolonged confrontation.
The more pressing question, in the bank's view, is over market leadership heading into the summer.
JPM does not expect a repeat of last year's pattern, when Nvidia rallied 120% in the six months following the Liberation Day moves and Magnificent Seven technology stocks dominated returns, constrained by tariff headwinds and earnings disappointments in China and Europe.
This time, the bank expects broader participation, pointing to signs that Magnificent Seven price-to-earnings multiples relative to the wider market had fallen to their lowest level in a decade before the recent recovery, while AI-exposed stocks had derated to record lows, setting up potential short squeezes.
JPM also flags that the dollar and bond yields have lagged the equity rebound so far, and could catch up, providing a further catalyst for market moves.
The bank reiterates its overweight stance on emerging markets versus developed markets, and retains a constructive view on semiconductors.