Global equity markets may find support from resilient corporate earnings amid ongoing concerns about stagflation, according to a recent report from JP Morgan. The report counters the prevailing bearish sentiment, stating that worries surrounding a stagflationary environment characterized by slowing growth and tighter liquidity may be exaggerated.
JP Morgan noted, “The bearish equity market views revolve around stagflation narrative… We continue to disagree with both,” indicating a disconnect between market perceptions and the underlying economic fundamentals. A crucial aspect of this optimistic outlook is the consistent upward revision of earnings expectations.
The report highlights that “aggregate earnings projections for 2026 are continuing to move up… not just in the US, but in most places,” suggesting that positive earnings momentum spans across various sectors and regions. While the Energy sector has experienced significant upgrades due to high oil prices, the improvements are not limited to this sector alone; multiple sectors have seen positive adjustments.
The future trajectory of oil prices is a vital consideration, with JP Morgan asserting that Brent crude averaging around USD 100 per barrel could still allow for earnings growth, unless geopolitical tensions rise substantially, potentially triggering widespread downgrades.
In Europe, headline earnings growth projections for 2026 may seem high at approximately 18 percent, largely driven by base effects in the Consumer Discretionary sector. A more measured median estimate of about 8 percent indicates potential for upside surprises, particularly if economic activity remains stable.
The report also noted that the ongoing Q1 earnings season is anticipated to reassure investors. Favorable activity trends during the quarter are expected to yield better-than-expected results across various markets. However, companies might provide cautious guidance due to persistent geopolitical uncertainties, even as investors begin to look beyond immediate challenges. Performance at the sector level is expected to remain varied.
Semiconductors, mining, and industrials are projected to deliver strong results, while the consumer discretionary sector may face pressure in the short term. “We still think Semis, Mining and Industrials results will look positive. Consumer Discretionary is likely to be under pressure, but better numbers could be coming in 2H; China data flow is looking stronger,” the report stated.
The Energy sector is expected to exceed current projections, while banking institutions may show resilience, recovering a portion of their recent underperformance. The report also mentioned shifting sector rotation trends since the pandemic, with cyclical sectors poised to lead the forthcoming phase.
Consumer cyclicals could represent the final phase of this rotation, particularly if geopolitical tensions diminish and there’s increased policy support for consumption leading up to significant political events in the US. JP Morgan emphasized that recent market corrections have created new opportunities, indicating that markets had entered oversold territory following the sell-off in March. Investors who turned bearish may need to reevaluate and rebuild positions, potentially providing additional momentum for a rebound.
Published on May 3, 2026
