JPMorgan: Summer Pullback Is a Buying Opportunity, AI No Longer the Only Theme
Taylor Wilson
JPMorgan's strategy team reiterates its buy-the-dip stance, arguing that as geopolitical shock fades, oil, the dollar, and bond yields should all reverse — opening room for global equities; the team also warns that AI is no longer the market's only narrative and other themes will surface over the next six months.
Why does JPMorgan keep saying "buy the dip"?
Since the Iran war broke out, strategist Mislav Matejka's team has consistently advised treating equity selloffs as buying opportunities. Monday's note reaffirmed that call.
The core logic: the market is digesting the geopolitical shock, and the Q2 rallies in oil, inflation expectations, bond yields, and the dollar are all likely to reverse.
This means → the four variables that pressured stocks are loosening at the same time, giving the rebound a broader base than it appears on the surface.
What underpins the rebound case?
Major economies have shown solid resilience through the Middle East conflict, with no recession-like deterioration.
Central banks have not launched aggressive rate-hike cycles, and inflation expectations show no signs of de-anchoring — the scenario where markets lose faith in central banks' ability to control prices.
Bond-yield spikes look unsustainable. The dollar has strengthened as a safe haven, but international equities generally prefer a weaker dollar — once it retreats, funding pressure on overseas markets eases.
Why is AI "no longer the only story"?
AI dominated market performance during the conflict, but JPMorgan expects other narratives to emerge over the next six months.
The Roundhill Magnificent Seven ETF — tracking the mega-cap tech names — is down roughly 1.3% year-to-date (FactSet data). The team is relatively cautious on U.S. big tech.
They also flag AI "cannibalization sectors" — software, business services, and media. In plain terms = risk is not limited to the companies building AI chips; the industries AI displaces face pressure too.
Where should money go — which markets look better?
JPMorgan sees U.S. equities as still expensive; international markets offer more value. Taiwan's forward P/E — the multiple the market assigns to future earnings — has risen 11% since the war began; Italy is up 1.5%, Spain 0.6%.
The bank is especially bullish on South Korea, viewing the recent decline as a buying window, and expects global and emerging-market equities to hit new highs.
Eurozone earnings have fallen for two consecutive years, but a rebound is expected this year, led by value stocks, cyclicals, small caps, exporters, and France.
How to position across sectors — defense, resources, gold?
Defense stocks have underperformed despite the Iran conflict; the team recommends reducing exposure. This means → war ≠ automatic gains for defense — actual performance depends on order flow and valuation.
Basic resources have weakened recently; JPMorgan sees this as a chance to add.
Gold is described as "starting to look attractive"; the Philadelphia Semiconductor Index pullback is also viewed as a buying opportunity.
Summer pullbacks — historical norm or exception?
JPMorgan notes that investors remain cautious overall, with ample cash on the sidelines.
In plain terms = a large pool of money is waiting and watching; once signals improve, that cash becomes the fuel for a rebound.
The strategists stress that summer pullbacks are historically common and should not be over-read as trend reversals.
Content is for reference only, not financial advice.