JPMorgan analysts caution that ongoing tariff uncertainty remains a significant risk for markets, particularly in the Eurozone. They noted that tariff uncertainty “has likely not peaked yet,” with the region remaining highly sensitive to trade policy fluctuations. The analysts warned that recent economic strength might have been artificially boosted by a front-loading of orders ahead of tariffs, a dynamic that could soon reverse.
Revised Outlook and Fiscal Stimulus
JPMorgan’s economists have revised their outlook for the Eurozone in light of Germany’s newly announced fiscal stimulus, which they described as a “big deal.” This fiscal boost has prompted a 1% upgrade in German GDP growth projections for 2026. However, uncertainty remains regarding the timing of the stimulus delivery—a factor that has historically seen the Eurozone underperform expectations. Consequently, the firm is now neutralizing its long-standing preference for U.S. equities, citing “less US exceptionalism” and a more favorable international backdrop.
Market Valuations and Activity Concerns
While the Eurozone has performed well this year, JPMorgan warns that short-term conditions appear overbought, with equity valuations rising to a 15% premium relative to historical norms. This premium could be further pressured if bond yields continue to climb. Moreover, signs of an “activity air pocket” are emerging, which might lead to weaker Q2 labor data. The recent PMI improvement observed around the turn of the year might have been driven by a temporary front-loading of orders ahead of tariffs—a trend that could reverse once the anticipated payback occurs.
Sectoral Outlook and Investment Implications
Despite these headwinds, JPMorgan remains bullish on select sectors. Fiscal stimulus news is particularly positive for Construction, Capital Goods, and Banks. In contrast, the firm advises caution on Energy and China-related trades, such as Autos and Semiconductors, which may face additional pressure amid the evolving policy environment.
Investors seeking to assess how these fiscal and policy shifts might affect corporate performance can delve deeper using tools like the Financial Growth API for insights into revenue and profit trends, or explore historical performance data with the Historical Earnings API.
As tariff uncertainties and fiscal headwinds continue to shape the market, JPMorgan’s revised outlook underscores the need for vigilance. While there are opportunities in certain sectors, investors should be prepared for volatility until a clearer picture emerges from forthcoming economic data.
