JPM | FTM | Today’s Research | Europe

Research evidence excerpt

JPM | FTM | Today’s Research | Europe

, we entered the year bullish on Cyclicals, and in March we have advised to add to Mag-7.

If our constructive macro outlook proves right, supported by robust earnings delivery, no de-anchoring of inflation expectations,

and at the same time geopolitical risks fade in 2H, then Cyclicals are on track to remain a winning strategy for the balance of

the year, and we have last week outlined the case for Europe to catch up in 2H, too. Mag-7 are also likely to show further

absolute upside, we see the latest volatility in the space more as elevated positioning and extreme technicals related, together

with some IPO anxiety, rather than a fundamental change in the backdrop, and it will in our view be used as a buying

opportunity. That said, there could be further drawdowns seen given extreme market concentration, and we do not believe that

the group will be the “only story in town in 2H” – we see differences from 2025’s post Liberation Day template. The market

breadth has been at record lows of late, we look for broadening in 2H. Now, tactically, three weeks ago we argued that low Vol

stocks could see spells of better performance, irrespective of where bond yields go from here. We believe any Low Vol/beta

rotation will be short lived, and we do not expect it to have legs in the 2nd half. The trade is likely just a digestion of a strong

past run of beta, “sell the good news” type. The rotation into the Consumer space is showing some signs of life. The Luxury

sector has been off lows for some weeks now, as are the Airlines and Hospitality subsectors. Consumer is in the eye of the

storm, but we outlined recently that this is the one Cyclical subgroup that is yet to rally, possibly in 2H. The rotation into