JPM | US MACRO THEMATICS - Equities and Fixed income are making different assumptions about the Fed...

Research evidence excerpt

JPM | US MACRO THEMATICS - Equities and Fixed income are making different assumptions about the Fed...

Specialist Sales

US Specialist Sales J P M O R G A N

01 July 2026

JPM | US MACRO THEMATICS - Equities and Fixed income are

making different assumptions about the Fed...

Marissa Gitler

+1 212 622 2934

marissa.gitler@jpmorgan.com

US Thematics focuses on key macro views, market debates, and favored investment themes.

Bottom Line: RTY’s historic outperformance of SPX year-to-date is fundamentally supported but tactically stretched. The

broadening trade has real legs driven by AI capex diffusion into industrials/power infrastructure and the equity market’s

forward pricing of oil-driven relief for small business margins, but the entry point is complicated by a dangerous divergence:

equity markets have already begun to move while fixed income continues to price an increasingly hawkish Fed.

Monday, I pointed out the extreme performance spread of RTY to SPX year to date, which if held through year end, would mark

the largest spread of Russell 2000 performance over S&P 500 in over 20 years. The start of this week has witnessed a moderate

reversion of this performance (back into AI concentration), but the trend since mid-May remains notable.

While small cap performance at the start of the year was boosted by a combination of: assumed upcoming Fed cuts and fiscal

policy (revenue insulation from tariffs, reshoring and fiscal tailwinds from OBBBA) that was eventually confirmed by healthy

earnings growth in Q1, what’s been more puzzling is the recent ascension after the fact. In fact, the outperformance of RTY over

SPX for the past 6 weeks would appear completely at odds with the current environment of increasingly hawkish Fed pricing.