JPMorgan said in a global market strategy report published on Sept. 18, 2026 that developed-market central banks are shifting toward synchronized tightening, but the bank’s core message was that corporate earnings still matter more than rates alone in setting the direction for equities.
The report, written by analyst Fabio Bassi, said Federal Reserve Chair Warsh reiterated the commitment to price stability at his press conference and offered no additional forward guidance. The median dot in the Fed’s dot plot points to one more rate hike this year, with rates unchanged in 2027, though 8 of 18 policymakers still expect another hike next year. The same projections show 25-basis-point cuts in both 2028 and 2029, while the neutral policy rate was lifted to 3.25%.
Developed-market central banks are tightening together
JPMorgan said the Fed’s latest move reverses the “insurance cuts” delivered at the end of 2025 in response to labor-market weakness. The bank expects a 25-basis-point hike in December and sees a risk of a third increase in early 2027 if its macro base case of resilient growth and sticky inflation holds.
In rates markets, JPMorgan said OIS forward pricing looks reasonable and raised its targets for 2-year and 10-year U.S. Treasury yields to 4.70% and 5.05%, respectively.
The tightening shift is not limited to the United States. The Bank of Japan tightened again, joining the European Central Bank, the Reserve Bank of Australia, the Reserve Bank of New Zealand and Norges Bank in raising rates. Sweden’s central bank and the Bank of England are expected to follow later this year, while the Bank of Canada is the only developed-market central bank staying on hold.
The Bank of England left rates unchanged this week, but policymakers stressed that policy could tighten if the Middle East conflict persists. JPMorgan expects a 25-basis-point Bank of England hike in November and another in February next year. The Bank of Japan raised rates by 25 basis points with two dissenting votes, and JPMorgan expects another hike in December. For the ECB, the bank expects one increase in December and another in March 2027, while market pricing for the same period is about 70 basis points.
Earnings remain the anchor for stocks
JPMorgan’s central case is that if this hiking cycle stays shallow, equities can still be driven by earnings, with only limited pressure from rates. Its base case is that risk assets can absorb a limited reversal of last year’s insurance cuts. The bigger question is whether the curve starts to price a broader hiking cycle and whether long-end yields move materially higher.
Looking at longer-run history, the bank said there is an inverted-U relationship between the 10-year Treasury yield and the S&P 500 price-to-earnings multiple, with the turning point depending on the earnings-growth backdrop. Forward consensus earnings-per-share growth is still above 20%, and the S&P 500 is trading at about 18 times 2027 earnings. If those growth forecasts are realized, JPMorgan said history suggests valuation support can hold and equities can tolerate 10-year yields approaching 6%.
The bank also said the direct effect of higher rates on corporate fundamentals is gradual because corporate debt is largely fixed-rate and long-dated. Recent headwinds have been partly offset by stronger profitability in financials and better returns on large cash balances. More important, in JPMorgan’s view, are second-order channels: whether tighter financial conditions start to slow the AI capital-expenditure cycle at the margin, and whether higher rates widen spending gaps across income groups. That mix, the bank said, argues for focusing on balance-sheet quality and margin resilience rather than assuming a uniform rate shock across sectors.
Large-cap tech and communication services stand out
JPMorgan examined sector betas within the S&P 500 against 1y1y SOFR. Over the past month, communication services showed a beta of +6% with an R² of 56%, information technology posted a beta of +3% with an R² of 14%, and energy had a beta of +7% with an R² of 52%. Those three sectors outperformed the broader index when rates moved higher.
Health care showed a beta of -8% but still outperformed because of its defensive characteristics. Industrials posted a beta of -13% with an R² of 75%, while real estate showed a beta of -9% with an R² of 80%, making it the most rate-sensitive lagging sector. Small caps had a beta of -8% with an R² of 81% and underperformed large caps by 3.4%. Large caps had a beta close to zero, suggesting relative insulation from rate moves. JPMorgan reiterated its preference for large caps, technology and communication services.
Brent may struggle to stay above $100
Middle East tensions pushed Brent crude to $100-$110 a barrel, above the $75-$100 range that had held since late May. JPMorgan said that even under a scenario in which the regional conflict becomes “permanent,” Brent would likely struggle to remain sustainably above $100 a barrel.
The bank said supply shocks would be largely offset by pre-war surplus capacity, incremental supply and inventories. The key balancing mechanism would be price-sensitive demand destruction as refined-product prices rise. JPMorgan’s commodities strategy team no longer has a clear base case for an end to the Iran conflict. It also said the U.S. economy’s pain threshold has already been breached, while an exit path remains unclear. Brent is trading above the bank’s estimated fair value of about $90, which JPMorgan said is consistent with a risk premium and fears of additional supply losses.
U.S.-China summit seen as symbolically important
JPMorgan said China’s president is expected to visit Washington from Sept. 23 to Sept. 25 and hold a second summit this year with President Trump. The bank said the relationship has moved beyond tariff friction into broader trade and technology conflict, wider sanctions, supply-chain separation and tensions around energy security.
In JPMorgan’s view, the visit carries high symbolic value but faces a limited bar for substantive outcomes. Its base case is a strategic compromise within a framework of managed decoupling rather than a sweeping “grand bargain.” The report added that investors are increasingly alert to the risk that the summit could evolve into a transactional arrangement, in which de-escalation in the Middle East and/or maritime security cooperation is exchanged for narrower trade-policy easing. If that happens, JPMorgan said it could offer temporary relief to the global cycle by lowering geopolitical risk premia and improving confidence.
Overweight equities and emerging markets
On asset allocation, JPMorgan kept a constructive stance on global equities and said large caps, quality growth and technology are likely to lead during Fed tightening. The bank added that limited rate hikes and a resilient macro cycle could support a broader advance.
In bonds, JPMorgan said the front ends of U.S. and German curves look cheap relative to central-bank benchmarks, though the risk remains that markets continue to price in more hikes. In foreign exchange, repricing of Fed expectations and hawkish remarks from Warsh have supported the dollar, and the bank said there is room for further gains against developed-market currencies. In emerging markets, JPMorgan is overweight EM FX and neutral on rates. In credit, it said credit remains the asset class most resilient to Fed hikes, with a preference for investment grade in Europe and high yield second.
Overall, JPMorgan said the global hiking cycle has reopened, but it still sees this phase as shallow. If inflation data continue to surprise to the upside and force the Fed from limited hikes into a broader tightening cycle, the durability of the earnings anchor for equities will become the market’s next test.
This article is a factual rewrite of a Sept. 18, 2026 JPMorgan global market strategy report as presented in the source material. The ratings, targets, earnings forecasts and related judgments cited are the views of the institution’s analysts and do not constitute investment advice.
