JPMorgan said in a Sept. 14, 2026 equity strategy report that the recent decline in global stocks following Brent crude’s move above $100 does not mark a reversal in trend. Instead, the bank said the weakness created by the oil shock offers a chance to add to equity positions, with third-quarter earnings from October expected to give markets a fresh anchor.
According to the report, Brent crude was at $107.6 on Sept. 10, while rising bond yields added pressure to global equities. JPMorgan analyst Mislav Matejka framed the central question as whether investors should join the sell-off. The bank’s answer was no. It said short-term moves in oil will shape risk appetite, but those swings should not be projected too far forward. Over the past two years, JPMorgan said, the market has repeatedly followed an "escalation to de-escalation" script, in which bearish turns tied to rising oil prices were later reversed by easing headlines.
Oil shock seen as a chance to add risk
JPMorgan said Brent’s break above $100 last week was the final blow to equity-market resilience. Before that, stocks had remained firm on improving economic activity and upward earnings revisions. The bank said the current backdrop still matches its "escalation to de-escalation" template and that, over a three- to six-month horizon, selling into an oil-driven equity drop does not look attractive.
The report also said seasonality is weak at the moment, while investors remain uneasy about inflation and bond yields, leaving room for more softness in the weeks ahead. Even so, JPMorgan cautioned against extrapolating that volatility too far. It expects the seasonal weakness to fade as the calendar turns and sees the next earnings season as a new reference point for markets.
On earnings, the bank said revision momentum is strengthening in a key zone, with upgrades outnumbering downgrades and breadth continuing to widen. JPMorgan noted that this kind of positive revision momentum rarely appears at the start of a sustained market decline. It pointed to improved euro-area manufacturing PMI in the second quarter and a stronger U.S. ISM manufacturing reading as a solid base for third-quarter earnings.
Stock-bond correlation has not reached a turning point
JPMorgan said equities have so far absorbed higher bond yields well this year. The report said MXWO is up 11% year to date, while bond yields have risen 65 basis points over the same period. In the bank’s view, the increase in yields has been driven by stronger economic activity and earnings upgrades, pushing real rates higher without lifting long-term inflation expectations.
The bank also said the 5y-5y inflation forward has not responded to the recent rise in oil prices, a break from the historical relationship. Term premium is at a 10-year high, and most of the normalization process has already taken place. Wage growth is still slowing, and the latest nonfarm payrolls report showed strong headline data while hourly wage growth was the slowest in five years. With nominal GDP growth averaging 5% to 6%, JPMorgan said bond yields at or below that range should not be treated as a headwind for equities.
The bank repeated its view that stock-bond correlation faces reversal risk only when the 10-year U.S. Treasury yield moves near 5% to 5.5%. The current level is about 4.83%, still below that zone. As long as the drivers of higher yields do not change and the absolute level does not become too high, JPMorgan said this should not become a problem in the coming months. It added that credit growth remains strong in both the U.S. and Europe, which it described as direct evidence that current yield levels are not choking off the economy.
Cyclicals and value remain preferred styles
JPMorgan said rising yields tend to favor cyclical stocks in most cases, especially when the growth outlook is not under challenge. Over recent months, sector leadership has not shifted into a defensive pattern. Cyclicals have advanced, and low-volatility stocks have returned to their lows for the year, a setup the bank said is consistent with rising PMI readings and stronger earnings. If markets were truly rotating into defense, JPMorgan said the signals should look very different.
The report added that European cyclicals versus defensives remain tightly linked to the PMI cycle, with both strengthening together. Earnings momentum for cyclicals relative to defensives is also stronger. JPMorgan said value stocks should perform well too, especially as the earnings edge enjoyed by growth over value appears to be peaking. The bank argued that the premium attached to growth stocks will be harder to sustain as their forward earnings advantage over value narrows.
Overweight equities, with preference for emerging markets and the euro area
In asset allocation, JPMorgan kept an overweight on equities, a neutral stance on bonds and an underweight on cash. Regionally, it remains overweight emerging markets and the euro area, underweight developed markets overall, and neutral on the U.S., Japan and the U.K.
- Emerging markets: valuations are cheap, fund flows may restart, a weaker U.S. dollar is supportive, and China’s trade headwinds are easing.
- Euro area: supported by an improving credit impulse, auto-sales data, and stronger earnings revisions and PMI readings.
By sector, JPMorgan is overweight materials, industrials and consumer discretionary, and underweight energy, consumer staples, healthcare and financials.
- Materials: backed by cyclical recovery and earnings revisions.
- Industrials: helped by earnings upgrades in capital goods and transport.
- Consumer discretionary: supported by improving earnings in autos and durable goods.
Main risks remain oil and geopolitics
JPMorgan said a further surge in oil prices would weigh on equities, while geopolitical escalation could intensify volatility. The bank also said a Federal Reserve rate hike this week may be better than no hike because it helps build credibility. As long as the move is measured, earnings growth stays strong and inflation does not become unanchored, JPMorgan said equities should be able to absorb it.
The bank’s conclusion was that investors should use oil-driven equity weakness to add to stocks, with current volatility eventually giving way to better trading conditions as third-quarter earnings come into focus.
The source text also noted that the ratings, target prices, earnings forecasts and related judgments cited in the article are the views of JPMorgan analysts in the Sept. 14, 2026 report and represent the institution’s position only. It added that the material does not constitute investment advice and should not be used as the basis for buying or selling securities.