JPMorgan and Morgan Stanley have issued research notes advising long-term investors to view recent market weakness, driven by Middle East geopolitical tensions, as a buying opportunity. The banks argue that despite volatility, underlying economic and corporate fundamentals remain strong, setting the stage for a potential recovery.
JPMorgan's note, led by European equity strategist Mislav Matejka, was published on Monday, April 13, 2026. It explicitly tells investors with a 3–12 month horizon to "add risk during pullbacks" rather than retreat from markets. The bank believes the conditions for a V-shaped recovery are already in place, citing oversold signals and heavy investor de-risking that occurred about two to three weeks into the Iran conflict as a cue to start buying—a call JPMorgan first made on March 23.
The analysis contrasts the 2026 environment with 2022, highlighting key differences. Matejka notes that current inflation pressures are less severe, corporate pricing power is weaker, and wage growth is being moderated partly by AI adoption. Real interest rates and labor market conditions are also different. Consequently, JPMorgan recommends long-duration assets sensitive to interest rate changes, expecting central banks to look through an anticipated 1.5 percentage point rise in year-on-year inflation without de-anchoring expectations.
Supporting the bullish outlook, S&P 500 earnings per share estimates for 2026 have continued to rise, and the ISM manufacturing survey is at a three-year high. Eurozone EPS growth may reach 18.2% this year, and the Citigroup Economic Surprises Index is strongly positive.
Both banks see specific areas of opportunity. JPMorgan expects international stocks and emerging markets (EM) to resume outperforming US equities, a trend that was already showing an 11% outperformance before the conflict. It favors small caps and value stocks over growth. EM valuations remain at a 34% discount to developed markets. Morgan Stanley, led by strategist Michael Wilson, favors cyclical sectors like financials, industrials, and consumer discretionary, along with quality growth names including AI hyperscalers.
Regarding market performance, the S&P 500 fell up to 8% since the US-Israel war against Iran began, narrowly avoiding a technical correction (10% drop). It has shown relative resilience compared to Europe’s STOXX 600 (down over 11%) and the MSCI EM Index (in correction territory). The valuation premium for the "Magnificent Seven" tech stocks has also compressed, with their forward P/E ratio declining to 1.2 times that of the S&P 500 from 1.7 times previously.
