JPMorgan analysts are reassessing whether investors should continue positioning for a potential unwinding of the “US exceptionalism” trade, as US equities have underperformed the MSCI World ex-US by 5% year-to-date. However, they caution against fully underweighting US stocks, citing strong economic fundamentals and earnings growth.

Key Factors Driving the Debate
1?? US Valuation Premium Still Elevated
? While US stocks trade at a significant premium compared to global markets, JPMorgan argues that:

The historical valuation gap is still above normal levels
However, strong earnings growth continues to justify some of the premium

? Investors can track valuation shifts using the Sector P/E Ratio API to compare US stock valuations against global markets.? Check Sector P/E Ratios

2?? The “Mag-7” Effect: Key Driver of US Outperformance
? The Magnificent 7 (Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, and Tesla) have accounted for:

40% of S&P 500 gains over the past decade
50% of US equity outperformance vs. international markets

? Risk Factor: If the Mag-7 loses momentum, US stocks could struggle to outperform globally.

3?? US Economy Still Outpacing Global Growth
? Economic growth remains a tailwind for US markets, with JPMorgan projecting:

2.5% real GDP growth for the US
Sub-1% growth for the Eurozone
4% growth for China

? The widening US economic lead suggests that US stocks could continue outperforming international markets, especially in the face of slower European growth.
? Investors can analyze company earnings trends using the Financial Growth API to see how US corporate profits compare globally.? Explore Financial Growth Data

4?? Trade Tensions Pose a Global Risk
? JPMorgan warns that trade tensions remain a major risk, stating:

New tariffs could impact global business confidence
The US may be less affected than other regions

? Potential Impacts:

US companies with high global exposure (e.g., tech & industrials) may face headwinds
Domestic-focused stocks could outperform in a more protectionist environment

Bottom Line: US Stocks Still Have Upside, But Risks Loom ?
? JPMorgan maintains a cautious, but not fully bearish, stance on US stocks.

Valuations remain high, but strong earnings growth supports current levels
The Mag-7 remains crucial—if they slow down, US outperformance could fade
US GDP growth remains robust, outpacing Europe and keeping US markets resilient
Trade tensions remain a wildcard, but the US is likely less vulnerable than other regions

? Investor Strategy:? Monitor earnings trends—if profit growth slows, the bear case strengthens? Watch global valuation spreads—if US premiums shrink, international equities may gain appeal? Stay diversified—tech dependency remains a double-edged sword for US stocks