JPMorgan Optimistic on Global Equities: Iran Conflict Presents "Buy the Dip" Opportunity

Despite the protracted conflict in the Middle East, JPMorgan Chase remains optimistic about the outlook for global stock markets, encouraging investors to buy into market weakness.

 

The firm argues that the sell-off triggered by the Middle East conflict has created a prime buying opportunity rather than a reason to turn bearish.

Central Banks Unlikely to Rush Rate Hikes

A stock strategy team led by JPMorgan strategist Mislav Matejka stated in a report that they maintain a positive outlook on equities despite the sharp V-shaped recovery following the outbreak of the Iran conflict.

 

They noted that any further declines triggered by geopolitical headlines should be viewed as an opportunity to increase exposure.

 

The strategists pointed out that, given multiple military, political, and economic constraints, they do not believe the Iran conflict will become a long-term, structural engagement.

 

Furthermore, they emphasized that the current environment differs from the 2022 inflation shock.

 

A key differentiator is the wage and inflation backdrop: in early 2022, the Atlanta Fed’s wage growth tracker was above 6% and rising, forcing central banks into aggressive tightening to prevent an inflationary spiral. Today, that same indicator sits at approximately 4% and has been trending downward for several quarters.

 

Additionally, global policy rates are currently closer to historical norms, with the European Central Bank at neutral levels and the Fed funds rate at 3.75%. Under these conditions, there is little urgency for central banks to hike further.

 

"We continue to believe that the rate-hike expectations built up during the conflict may be overblown," the strategists wrote. "It is difficult to believe that central banks would tighten policy in response to a geopolitically driven energy supply shock that is clearly detrimental to economic growth.

 

Any premature hike could be viewed as a policy error, increasing the risk of an eventual reversal."

Earnings Growth Providing Upside Momentum

The JPMorgan team noted that corporate earnings momentum remains a key pillar of support for stock prices across various regions.

 

For 2026, MSCI Eurozone earnings per share (EPS) growth is projected at approximately 19%, with positive revisions seen in industrials, financials, and materials. MSCI Emerging Markets is expected to see a consensus EPS jump of 45% in 2026, while S&P 500 earnings growth is forecasted at around 20%.

 

Regarding market leadership, JPMorgan expects that this year will not see a repeat of last year’s narrow, AI-dominated rally.

 

"We believe market leadership will broaden out and will not mirror last year’s performance," the strategists said.

 

While they remain bullish on the continued rise of "Magnificent Seven" tech giants and reiterate an overweight rating on semiconductors, they believe the next leg of the rally will be driven by a more diverse set of sectors and regions, including value stocks and small caps.

 

These segments are expected to benefit as the U.S. dollar resumes its weakening trend and Treasury yields decline.

 

Regionally, JPMorgan reiterated its overweight stance on emerging markets for the second consecutive year, citing attractive valuations, improving fundamentals, and light investor positioning.