JPMorgan: US stock market to remain global leader and continue to outperform other markets
1min read JPMorgan strategist Mislav Matejka said that the dominance of US stocks over the rest of the world is unlikely to wane unless geopolitical and trade policy risks dissipate.The US market has outperformed international markets this year, driven by a tech and AI boom, while the US economy has remained resilient and the Fed has entered a cycle of rate cuts as inflation has fallen.“The current dichotomy in regional market performance may persist,” strategists including Mr Matejka wrote in a report on Wednesday. “International markets look cheap on a price-to-earnings basis, while the US market remains high, but the relative yield differential may stay high for some time.”The S&P 500 index rose 26 per cent in 2024, hitting several record highs, while the MSCI World (ex-US) index rose just 3.5 per cent. The valuation gap has also widened, with US stocks now trading at a record 60 per cent premium to international peers on a forward price-to-earnings basis.President Trump’s election victory cemented investors’ preference for US assets as traders expected his policies to spark global trade tensions. The incoming president has already outlined plans to impose tariffs on Mexican, Canadian and Chinese imports, with Europe a possible next target.JPMorgan strategists pointed to the potential for convergence given the extreme positioning of US stocks and the valuation and performance gap with international peers. “However, we still believe that a clearer understanding of trade and geopolitical developments is needed before a shift can take place,” they said.Mr Matejka was cautious on the stock market in the first half of next year, urging investors to focus on the Fed’s policy, the dollar’s trajectory and profit growth forecasts that he believes are too optimistic, especially in Europe.“The above factors, combined with geopolitical uncertainty, may mean that the market will be mixed in the first half of the year as the above pressures are resolved and a recovery ensues,” he said.