JPM | FTM | Today’s Research | Europe

Research evidence excerpt

JPM | FTM | Today’s Research | Europe

Europe Equity Research

Europe First to Market 18 May 2026

Today’s Morning Meeting | Also Published Today | Key Changes | JPM Events | Upcoming Earnings

Today’s Morning Meeting

Equity Strategy (Mislav Matejka, CFA)

Cyclicals, Value and Small caps lead ytd - a bridge too far for some?

Looking at the ytd performance beneath the surface, many we speak to find it somewhat counterintuitive that in Europe

Cyclicals, Value & Small caps are all in the lead ytd, and some are even increasing this lead despite the Iran conflict in the

backdrop. In the US, Cyclical sectors are also ahead ytd. Cyclicals/Defensives lead in both regions remains the case even

when Tech/AI impact is fully stripped out from the comparison. On the other side, low Vol stocks have done particularly badly

since the conflict started. The overall market breadth is very narrow, the proportion of stocks that are outperforming on a 3-

month lookback is making fresh lows in both the US and in Europe. Sectorwise, most Cyclical groups are ahead with the

exception of Consumer Discretionary space, and most Defensives are lagging, with the exception of Utilities and Telecoms. We

have entered this year long Value, small caps and Cyclicals in International portfolios, and revisit their cases below: We believe

that Value style has more upside in Europe, on valuation support. As regards small caps, it is notable that they are in fact

making fresh gains in Eurozone since the Iran conflict started. For the US portfolio, the case for small caps and for Value is less

clear cut; their rally reversed since the conflict started. Instead, we have called for a positive stance on Mag-7 in our March

Chartbook.