JPMorgan Sees Geopolitical Selloffs as Buying Opportunities, Citing Strong Earnings

JPMorgan is encouraging investors to buy into equity market weakness driven by the conflict involving Iran, arguing that a surprisingly resilient corporate earnings outlook will continue to bolster stocks through the second half of the year.

In a Monday note, strategists led by Mislav Matejka stated that their bullish view for 2026 was founded on a strong earnings outlook, a stance that contrasted with more bearish consensus expectations at the start of the year. “Iran conflict is flaring up again, but we think one keeps using the dips driven by this to add,” the strategists wrote.

Resilient Earnings Outlook

Despite renewed geopolitical uncertainty, JPMorgan notes that earnings per share (EPS) projections for 2026 have continued to rise across all regions, not just within the Information Technology and Energy sectors. This trend defies the typical pattern where analysts reduce estimates ahead of reporting season.

While consensus Q2 earnings growth forecasts appear high at approximately 22% year-over-year in the U.S. and 12% in the eurozone, the bank suggests a more realistic gauge is median EPS growth. Projections for median growth stand at a “very achievable” 8% for both regions, according to the note.

Economic Indicators Support Upside

JPMorgan's confidence is supported by several positive economic signals that suggest further earnings upside, particularly for cyclical sectors. The strategists highlighted several key factors:

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• Improving global activity data and a pickup in the OECD leading indicator.
• A jump in eurozone economic surprises into positive territory.
• Continued improvement in eurozone credit growth.
• Resilient U.S. jobless claims.

Eurozone earnings revisions have also turned positive and are nearing parity with the U.S. for the first time since early 2025. The bank expects the region to post strong double-digit EPS growth this year, provided the geopolitical situation does not escalate further.

Market and Sector Views

The strategists believe the market has become adept at pricing geopolitical risk as transitory, given strong incentives for de-escalation on both sides. They also anticipate a broadening of market leadership beyond mega-cap technology stocks.

At the sector level, JPMorgan expects Banks to deliver reassuring results and sees Semiconductors as positioned for a rebound. In contrast, the bank noted that the Energy sector no longer offers a significant valuation cushion against swings in oil prices.