JPMorgan: Stock buying on the horizon, but not just yet

Investing.com -- JPMorgan strategists believe there will be opportunities to buy equities in the second half (2H) of this year—but not just yet.

“We continue to believe that we would be buyers of equities sometime in 2H, but the current volatility is likely not done yet,” strategists led by Mislav Matejka said in a note.

Despite the recent 90-day tariff pause and select exemptions, the broader market backdrop remains challenging.

The effective U.S. tariff rate has surged from 2.3% in 2024 to 23%, and equity markets have not fully reflected the downside risks.

“This is an already much worse backdrop than most expected at the start of the year,” the strategists said, pointing out that the S&P 500 is down only 13% from its February peak and still trades at 19x forward earnings—levels typically seen at the start of a downturn, not the end.

They argue that recession risks are underpriced. Historically, in the last five recessions, the S&P 500 dropped an average of 37% peak to trough, with forward price-to-earnings (P/E) ratios falling to 12x.

By contrast, current valuation multiples remain elevated, suggesting that equities have more room to adjust.

While a technical rebound followed the recent VIX spike, Matejka notes that such bounces are usually short-lived during economic downturns. “Over 3 months, [the S&P 500] is positive outside recessions, but if recession were to materialize, the hit ratio falls to 20%.”

As such, the bank maintains a cautious stance for now, favoring defensive sectors Staples, Healthcare, and Utilities, while avoiding high-beta exposures such as Growth and the “Mag-7” tech names.

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“In order to be sustainably adding, beyond the technical bounces, we believe one needs to see tariffs newsflow settle, one needs to see potential departures from the administration to materialize, as well as for the Fed to capitulate, but that might not happen before labour market falters.”

Regionally, strategists believe international markets will hold up better than usual during periods of volatility, pointing to more attractive valuations, stronger fiscal support, and less reliance on tech-driven growth.

The bank also believes the U.S. dollar is less likely to act as a safe haven this time, which could further support relative resilience abroad.

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