Style Sector Compass: QMI ‘Contraction‘; reducing Risk, increasing Quality: Sector + Industry Playbook for the Quality rotation

Research evidence excerpt

Style Sector Compass: QMI ‘Contraction‘; reducing Risk, increasing Quality: Sector + Industry Playbook for the Quality rotation

J P M O R G A N Global Markets Strategy

30 June 2026

Style Sector Compass

QMI ‘Contraction’; reducing Risk, increasing Quality:

Sector + Industry Playbook for the Quality rotation

• European QMI rotates to the ‘Contraction’ phase European Quantitative Strategy

AC After two years in the ‘Recovery’ phase, the European QMI, our macro Ayub Hanif, PhD

navigational tool, has decisively rotated towards the ‘Contraction’, signaling (44-20) 7742-5620

a higher probability of economic growth disappointment. This month 5 out of ayub.hanif@jpmorgan.com

6 QMI inputs are now falling, and a shift in style leadership is very likely to Khuram Chaudhry

follow. Simply put, the message is to reduce High Risk, and add High Quality (44-20) 7134-6297

& Low Volatility. We are now overweight Value & Quality/Low Volatility khuram.chaudhry@jpmorgan.com

(QaRP), underweight Growth & High Risk, and neutral Momentum and Size. William Summer

We have rotated away from the ‘Recovery’ phase following positive returns – (44-20) 7742-6079

william.summer@jpmorgan.com

L/S QMI is up by +29.2% with a Sharpe ratio of 3.3. L/S Risk is up by 51.1%, J.P. Morgan Securities plc

with a Sharpe ratio of 3.9. L/S Value is up 25.7%, with a Sharpe ratio of 2.6.

L/S Quality is down 32%, and L/S Growth is down 3.7%.

• High Risk now looks even riskier The Style Sector Compass

As quants, mean-reversion theory is ingrained into our thinking, but in practice

the need for a catalyst frequently helps to establish the timing associated with

a change in investor behaviour. Today, the QMI, along with relative earnings

revisions trends and factor correlations are all aligning for a Quality rotation.