① JPMorgan Chase Strategists believe that despite the stock market's weakness due to concerns about AI trading and uncertainty surrounding the Fed's interest rate cut path, now is the time to strategically increase stock holdings; ② a strong U.S. economic outlook, continued strong corporate earnings, fading tariff concerns, and an optimistic international market outlook are expected to drive the stock market into early next year.
As the year draws to a close, investor sentiment towards artificial intelligence... Concerns about AI trading and uncertainty surrounding the Federal Reserve's interest rate path have led to a weak overall performance in the US stock market. However, JPMorgan strategists believe now is the time for investors to strategically increase their stock holdings.
Andrew Tyler and Federico Manicardi, two key strategists at JPMorgan's market intelligence division, said there are several key catalysts that should drive the stock market higher into early next year.
The following are the factors driving the development of the US stock market:
The U.S. economic outlook is strong. Despite signs of weakness in the job market, the U.S. economy as a whole remains robust. Tyler stated that from a debt perspective, the consumer sector, which accounts for two-thirds of GDP, appears to be in a "healthy state." He added that, at the same time, there are no signs that weakness in the labor market poses a "significant risk" to the overall economy in the near term. (According to the Atlanta Federal Reserve Bank) According to the latest estimates from the GDPNow tool, the U.S. economy is projected to grow by 3.9% year-on-year in the third quarter.
Corporate earnings. Companies continue to report strong financial results, ranking high among those that have already released their third-quarter earnings reports. Of the companies in the S&P 500, 83% exceeded analysts' expectations. The latest data from FactSet also suggests the index is on track for its highest earnings growth in three years.
Tariff concerns are fading. The "Liberation Day tariffs" announced by US President Trump in April have not had the severe impact initially feared by the market. Tyler said that the average effective tariff rate in the US has steadily declined throughout the year, and this trend is expected to continue until 2026.
The outlook for international markets is strong. Manicardi stated that the outlook for international stock markets next year is also very optimistic. For example, the Chinese economy appears to be in the "early stages of recovery." Economic activity across Europe is also accelerating.
Tyler stated, "We are tactically bullish, and we expect the stock market to continue its upward trend in early 2026." The team also mentioned that they favor a barbell portfolio.
A barbell portfolio refers to an investment strategy where investors divide their portfolio primarily into high-risk and low-risk assets. The idea is that if one part of the portfolio underperforms, the other part can provide downside protection, allowing investors to hedge against risk while realizing profits from higher-return, more speculative investments.
JPMorgan Chase also offered the following three investment recommendations: 1. Artificial intelligence stocks
Tyler stated that on one side of the barbell, the bank favors large-cap tech stocks, especially those related to artificial intelligence .
Despite minor fluctuations in November, artificial intelligence stocks remain the best-performing investment choice in the market for 2025. The Roundhill Magnificent Seven ETF, comprised of seven giants in the AI field, has risen 23.7% this year.
2. Cyclical stocks
On the other side of the barbell, the bank favors cyclical stocks, which tend to perform well during economic expansions. Tyler says this will allow investors to capitalize on the upcoming economic "reopening."
JPMorgan has listed the following key sectors worth paying attention to:
Bank and financial stocks
Material inventory
Energy stocks
Consumer stocks, such as retailers, airlines, and transportation companies.
3. Key areas of the global stock market
Manicardi highlighted potential opportunities in regions such as China, Europe, Japan, and India.
The following are the key international areas of focus for the bank:
bank stocks
Energy and Utilities Stocks related to "electrification"
Healthcare stocks
Mining stocks
Luxury goods stocks
renewable energy stocks
(Article source: CLS)
