Why JPM thinks rising bond yields won’t derail the equity rally

Investing.com -- JPMorgan remains bullish on global equities into year-end, arguing in a note Tuesday that rising bond yields should not prove a substantial obstacle for stocks because most of the move reflects stronger economic activity.

Global equities are up 15% year to date in dollar terms, and strategist Mislav Matejka expects continued strong earnings delivery, noting EPS revisions have turned outright positive across all regions.

That is aided by a rebound in purchasing managers' indices, with eurozone PMIs rising for three months in a row.

"We do not expect rising bond yields to present an insurmountable obstacle for stocks, as most of the up-move should be reflecting stronger activity momentum," the analyst wrote.

He added that term premia have largely normalized and he does not see inflation expectations becoming de-anchored, given soft wage growth and mixed labor markets, meaning central banks may deliver less tightening than is currently priced.

JPMorgan also looked for the dollar to peak and gold to bounce after a 20% to 25% pullback since the Iran conflict began, noting a weaker dollar typically helps international stocks, which are ahead of the U.S. for a second straight year.

The bank said technology and AI are unlikely to dominate returns in the second half, unlike in 2025, and it favors continued broadening. Its pecking order runs semiconductors over hyperscalers over at-risk AI plays, while it expects cyclicals to lead.

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