JPMorgan: Stock Market Returns Will Flatten in H2 2026
N.R. Finch
JPMorgan's strategy team warns that S&P 500 returns in H2 will trail the ~9% first-half gain, as bond-market fragility, sticky inflation, record retail exposure, and AI-driven layoffs all tighten the market's margin for error at once.
The first half rallied hard — can the second half keep up?
The S&P 500 is up ~9% year-to-date and has rebounded more than 18% from its April low, buoyed largely by Iran peace-talk expectations.
Senior analyst Zahin Ov stated plainly: "We expect further upside, but year-end returns are unlikely to replicate the first half."
This means → JPMorgan is not turning bearish — it is saying the easy gains are behind us, and every further step gets harder.
Who is buying US Treasuries now — and why should equity investors care?
A June report from the BIS — the central bank for central banks — found that traditional government-bond buyers are stepping back, replaced by hedge funds, foreign investors, and retail traders.
In plain terms = the stable, long-term holders who used to anchor the bond market are giving way to faster-moving money, making Treasuries more prone to sudden swings.
JPMorgan argues this has structurally raised the volatility floor — even routine macro news can now trigger larger price swings than in the past.
Inflation won't come down — what does that mean for stocks?
June US CPI still runs at an annualized 3.5%, well above the Fed's 2% target; tariff costs and Iran-conflict energy prices are the main drivers.
The 10-year Treasury yield has climbed to roughly 4.56%, breaching the key 4.5% level.
This means → the equity risk premium — the extra return stocks offer over bonds — has fallen to its lowest since the financial crisis. In plain terms = as "risk-free" bond yields rise, stocks must justify ever-higher hurdles to attract capital, leaving almost no room for valuation error.
Retail exposure is at a record — why is that a risk?
Equities now account for roughly one-third of total US household wealth, an all-time high; retail trading activity in 2025–2026 sits at or near historic peaks.
This reflects a double-edged loop: rising stocks → more spending → stronger economy; but a sharp drop → wealth destruction → spending cuts → economic damage far exceeding historical norms.
In plain terms = with households all-in on stocks, a selloff would hurt the real economy more than ever before — that is what JPMorgan calls the "downside feedback loop."
Could the AI layoff wave become the straw that breaks the market?
Challenger, Gray & Christmas data show AI has been the top reason for US corporate layoffs four months running, with announcements exceeding 100,000 so far this year.
A YouGov poll finds roughly 63% of Americans expect AI to keep eliminating jobs; young college graduates are bearing a disproportionate share.
This means → if the market narrative flips from "AI boosts productivity" to "AI destroys jobs," consumer confidence and equity sentiment will come under pressure simultaneously — the hardest-to-quantify yet potentially most destructive risk on JPMorgan's second-half watch list.
Content is for reference only, not financial advice.