JPMorgan’s strategist Mislav Matejka suggests that the attractiveness of equities might significantly increase in the latter half of 2025. Despite maintaining a cautious outlook due to elevated macro risks, weakening data, and ongoing trade policy uncertainties, Matejka remains optimistic about future prospects.
In the bank’s recent strategy review, Matejka expressed: “We anticipate transitioning to a risk-on approach at some stage in the second half.” However, he pointed out that certain conditions must be met before adopting a more bullish stance. These include a convergence of hard data with soft data, recalibration of earnings forecasts, overcoming weak guidance, and a reduction in tariff volatility in the upcoming months.
While soft economic indicators like consumer sentiment, anticipated output, and labor market perceptions have shown decline, some hard data such as industrial production and employment growth remain robust. Notably, weekly earnings revisions have hit their lowest in years, and announced job cuts have reached recessionary levels. “Challenger job cuts are at levels historically associated with recessions,” the note highlights.
Trade continues to pose significant uncertainty. Recent developments suggest a partial retreat from the most extreme tariff proposals. Yet, Matejka cautions that “it’s still plausible to encounter higher tariff levels than anticipated at the year’s start.” JPMorgan economists project that current proposals could elevate the effective U.S. tariff rate to 23%, equating to a tax hike of $730 billion or 2.4% of GDP, potentially the most substantial since World War II.
Given this context, Matejka believes equities might find it challenging to maintain any short-term rally. “We believe one should remain cautious on risk,” he noted, referencing a mix of trade and fiscal challenges, earnings declines, and heightened inflation expectations. Nonetheless, the strategist envisions a potentially more favorable landscape emerging later in the year, particularly if trade tensions ease and the Federal Reserve adjusts its policy stance.
Regionally, Matejka views international markets as offering a superior risk-return profile compared to the U.S., with potential to outperform in both recession and recovery scenarios. He stated that if growth falters, non-U.S. equities might demonstrate resilience, and in the event of easing tariff tensions, they could experience a more robust rally.
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