JPMorgan Trading Desk Turns Tactically Bullish
nashnova research
JPMorgan's Market Intel Desk upgraded its stance from tactical cautious/neutral to tactical bullish, anchored on five pillars — stronger-than-expected economic data, earnings upside, and falling bond volatility — while flagging tail risks around the rate-hike endpoint and inflation pass-through.
Their last call was right — what earns them another upgrade?
After turning cautious on August 31, the S&P 500 stayed roughly flat, while their recommended long Nasdaq 100 / short Russell 2000 pair trade gained over 8%, and US equities outperformed global peers.
This means → the shift is not a gut call but a follow-through after the previous stance was validated by the market.
In plain terms = they proved they could read the tape, then pushed one notch more bullish.
What are the five pillars holding up the bull case?
Economy: flash PMI — a leading gauge of manufacturing and services health — beat expectations. S&P 500 EPS growth tracks nominal GDP, not real GDP. This means → as long as inflation doesn't collapse, nominal growth supports earnings estimates.
Consumer: consumer spending keeps surprising to the upside; an improving labor market provides further support.
Earnings: Q2-26 earnings growth hit 52%; the market expects about 29% for Q3-26, with all 11 sectors forecast to post positive revenue and EPS growth. In plain terms = this is not a one-sector story — it is broad-based.
Rates: JPMorgan rate strategist Jay Barry expects the 10-year Treasury yield to edge from 5.18% to 5.20%, then ease to 5.05% by year-end. Lower bond volatility takes pressure off equities.
Which catalysts could fire this week?
Inflation data: PCE — the Fed's preferred inflation gauge — and ISM manufacturing PMI land this week. The prices-paid sub-index is a key forward indicator; a hot print could trigger a bear-flattening of the yield curve (short end pushed up by rate-hike expectations while the long end holds).
Labor data: continued improvement could trigger a "good news is bad news" dynamic. This means → the stronger the economy, the more the market fears the Fed keeps hiking longer.
AI theme: Meta's Muse launch lifted sentiment; OpenAI Developer Day and Micron earnings are also on deck. Overseas, Tokyo CPI, China PMI, and industrial-profit data will feed back into US markets via Treasury yields.
How is the desk positioning?
Core long remains tech: semis and the Mag 7 — Apple, Microsoft, Google, Amazon, Nvidia, Meta, Tesla — are expected to outperform. Software is a non-consensus long that is slowly gaining acceptance.
No longer pairing with a Russell 2000 short — falling oil prices and yields could trigger a short squeeze (forced covering that drives prices higher). The desk now expresses this view through derivatives.
Outside tech, banks are favored: the case rests on economic reopening, a potentially steeper yield curve, and improving capital-markets activity. Rate-sensitive sectors — real estate, telecoms, utilities — may join a squeeze short-term but are expected to underperform the S&P 500 longer-term.
The biggest potential catalyst is a US-Iran deal, which would lift European equities and the Russell 2000. Covid-reopening plays — airlines, cruise lines, hotels — are on the watch list, preferably accessed via options.
What could blow up this bull call?
Three tail risks: has the bond market underpriced the terminal rate of this hiking cycle; will the market start pricing in a single 50-basis-point hike; and when will agricultural inflation pass through to core inflation.
This means → if any of these gets repriced before earnings season, the tactical-bull thesis weakens.
In plain terms = they are bullish, but they have drawn three red lines — cross any one, and the call gets reassessed.
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