Stock markets are still enjoying ‘Goldilocks’ conditions, according to JPMorgan, which reckons non-US stocks can continue to outperform in the coming months.
Despite the US military build-up around Iran and US tariffs being reset, the bank argues the growth-inflation mix remains attractive for equities in 2026.
Earnings are holding up, activity data is solid, inflation is softening and long-dated bond yields have drifted lower, Fed funds futures are pricing more easing despite three-year highs in ISM readouts and a punchy payrolls print.
The strong run for equities “can lead to derisking episodes,” the bank’s strategists said, ie pull-backs, and if these are triggerred by adverse geopolitical such as potential Iran escalation or the latest tariff headlines, “we believe that these will not be long lasting, and should be seen as buying opportunities.”
JPM sees leadership – ie which stocks drive overall market performance – broadening away from the Mag-7 tech giants, which have “stalled” despite strong earnings, in favour of small caps, ‘value’ stocks and international (ie non-US) stocks.
If mega-cap tech does not reassert itself, US indices may struggle to lead.
“After years of lagging, international markets outperformed the US in 2025 by 12%,” and are again in the lead by 8% so far in 2026.
“We think this outperformance is justified, and believe that it will keep having legs,” JPM adds, “given still extreme positioning, elevated concentration of Mag-7 and the large valuation differential.”
“If Mag-7 does not retake the lead, it is unlikely US stocks will be able to, too.”
finance.yahoo.com
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