Amidst weeks of market turmoil and widespread investor anxiety, JPMorgan has issued a bold counter-narrative, suggesting that the current climate presents a unique opportunity for a V-shaped recovery.
In a research note released on April 13th, JPMorgan strategist Mislav Matejka outlined the bank’s firm stance, asserting that the prevailing conditions, despite geopolitical uncertainties, are ripe for a rebound.
Matejka argues that the recent sell-off is fuelled by fear rather than a deterioration of underlying economic factors. He noted that bearish sentiment had already become the dominant view early in the crisis, with expectations of soaring oil prices and widespread de-risking among investors.
JPMorgan believes that this capitulation in sentiment is a signal in itself. The bank posits that when the majority of investors have already sold off their holdings, the greater risk becomes missing out on a potential recovery.
"Military conflicts inherently display fat tails and drive elevated volatility, but we argued against succumbing to bearish views as the risk of getting whipsawed increases significantly," Matejka wrote.
The bank initially made this call on March 23rd and has maintained its position throughout the subsequent market fluctuations.
Matejka directly addressed concerns about a repeat of the market downturn of 2022, emphasising key differences in the current environment, including inflation pressures, corporate pricing power, real interest rates, and the strength of the labour market.
Furthermore, S&P 500 earnings per share estimates for 2026 have continued their upward trajectory even amidst the conflict. JPMorgan also anticipates that central banks will view a projected 1.5 percentage point increase in year-on-year inflation as a temporary surge rather than a fundamental shift.
The global economy entered this period of conflict with a relatively robust foundation, characterised by strong economic momentum and robust earnings growth, making a sustained bear market less probable.
However, JPMorgan is not advocating for indiscriminate buying across the board. The bank recommends focusing on cyclical sectors, including capital goods, semiconductors, and consumer cyclicals, as well as emerging markets and the Eurozone.
