Why JPMorgan Says Equity-Market Dips Are Buyable in 2026

JPMorgan’s equity strategists, led by Mislav Matejka, are making a conditional case for buying broad equity-market weakness in 2026. Their thesis is not that higher yields, inflation anxiety, or geopolitical shocks do not matter. It is that improving corporate earnings and cyclical data can make a pullback a valuation opportunity rather than evidence of an approaching earnings downturn. 1

The core argument: earnings are improving

The most important support for the call is the direction of earnings expectations. JPMorgan says profit revisions are improving, which matters because a decline in share prices can reduce valuation multiples while the expected earnings base remains intact. In that scenario, weaker prices may leave stocks cheaper relative to expected profits rather than signal the start of an earnings-led bear market. 1

The macro backdrop is central to that conclusion. The team pointed to manufacturing indicators in the U.S. and euro area that were near four-year highs, alongside stronger corporate-profit conditions. 1 Separate reporting on the strategy said earnings-per-share revisions had turned positive across regions and noted a rebound in purchasing-manager surveys, including three consecutive monthly increases in eurozone PMIs. 2

Together, those signals support the idea of firmer activity extending beyond a narrow group of technology leaders. If that broadening translates into revenue growth and durable margins, it would give the equity market a more diverse earnings foundation.

Why rising bond yields are not automatically bearish

Higher government-bond yields normally create a challenge for shares: they raise the rate used to value future cash flows and can make fixed-income assets relatively more attractive. JPMorgan does not dismiss that valuation headwind.

Instead, Matejka’s team argues that the source of the yield move matters. It views much of the rise in global yields as a reflection of stronger economic activity, rather than a signal of collapsing confidence or an uncontained inflation spiral. 2 Stronger nominal growth can support company sales and profits, helping to offset some pressure from a higher discount rate.

That is a conditional proposition, not a claim that equities are immune to yields. The equity case becomes much harder to sustain if yields rise because investors expect persistently higher inflation, fiscal stress, or much more restrictive monetary policy.

The risks that could break the buy-the-dip thesis

JPMorgan’s constructive stance comes with clear vulnerabilities:

• Inflation expectations: The strategy relies on longer-run inflation expectations staying anchored. A de-anchoring could force central banks into more aggressive tightening and damage growth as well as valuations.
• Oil and geopolitical shocks: Oil-price spikes linked to the Iran conflict can add to inflation pressure and weigh on consumers and corporate costs. Matejka has nevertheless argued that weakness driven by geopolitical headlines can be used to add exposure, provided underlying fundamentals remain resilient. 35
• Further central-bank tightening: Additional Federal Reserve or European Central Bank tightening would raise the risk that higher rates become a growth shock rather than a reflection of healthy activity.
• High public-debt burdens: Heavy G7 debt loads can keep long-term yields elevated and make markets more sensitive to fiscal concerns.
• An earnings reversal: A material deterioration in earnings revisions would directly challenge the premise that lower prices represent better value.

Earnings season is the decisive checkpoint

The upcoming reporting season is the clearest near-term test of the strategy. Positive revisions and encouraging manufacturing data are forward-looking signals; company results and guidance must show that they are becoming actual profit delivery. 12

Investors following the thesis should therefore watch whether earnings expectations remain intact, whether companies describe demand as broadening, and whether margin pressure from rates, wages, or energy is manageable. A widespread guidance reset would make it harder to characterize a selloff as a simple valuation adjustment.

Why JPMorgan sees a different setup from 2022

The distinction from the 2022 selloff is the interaction between rates and fundamentals. In 2022, rapid central-bank rate hikes reset valuations while growth and profit expectations also weakened. The current JPMorgan case rests on the opposite combination: yields may be higher, but earnings revisions and cyclical indicators are improving. 12

That does not eliminate downside risk. It means the strategists see higher yields as potentially compatible with equities when they accompany stronger activity and contained inflation expectations—not when they threaten to trigger a policy-driven recession.

Bottom line

JPMorgan’s recommendation is a conditional bullish framework: buy weakness when it is driven by sentiment, valuation pressure, or temporary geopolitical concern and when earnings remain on an improving track. 13 The signals that would call for reassessment are straightforward—an inflation-expectations shock, persistently disruptive oil inflation, materially tighter policy, or a clear reversal in corporate-profit revisions.