JPMorgan strategists remain constructive on global equities heading into year-end, anticipating a gradual upward trend driven by sector rotation rather than a broad market surge. Fabio Bassi, global equity strategist at the bank, said the firm expects "a grind higher with rotation rather than a broad melt-up move" as key tailwinds persist through December.
The bank’s outlook is underpinned by improving risk appetite, evidenced by a rebound in semiconductor stocks that signals tactical healing in investor sentiment. JPMorgan also expects positioning and dispersion across sectors to fuel the next leg of gains, with Federal Reserve policy remaining a critical stabilizer. A Fed on hold amid a "Goldilocks scenario of genuine disinflation" could broaden the equity rally by reducing volatility and supporting risk-on sentiment.
Sector preferences remain focused on quality growth names and hyperscalers, while semiconductors appear attractive following recent repricing. The bank does not view the recent sharp selloff in long-term Treasury yields or the renewed steepening of developed market yield curves as a policy error signal. Instead, JPMorgan attributes the moves to increased demand for capital and investment opportunities, particularly in AI-related infrastructure, which has driven higher real returns on investment.
The bank projects only a modest further rise in term premiums, a scenario it does not expect to trigger a broad risk-off shift. The Treasury’s recent decision to expand 10-year and 30-year bond buybacks was interpreted as a signal of discomfort with elevated long-term yields, though JPMorgan does not anticipate the upcoming Jackson Hole symposium to resolve ongoing debates over the Fed’s reaction function.
The baseline outlook assumes continued investor patience with higher long-end yields, provided they reflect stronger economic fundamentals rather than policy missteps.
