Buy the dips in international stocks as US lead fades, says JPMorgan

• International stocks outperformed US markets by 12% in 2025 and lead by 8% year-to-date in 2026, with JPMorgan expecting this trend to continue
• Market leadership is broadening away from Mag-7 tech stocks toward small caps, value stocks, and international equities, with mega-cap tech having 'stalled' despite strong earnings
• JPMorgan sees pullbacks triggered by geopolitical risks (Iran tensions, tariffs) as temporary buying opportunities given solid earnings, softening inflation, and lower long-dated bond yields

Summary

Key Recommendation: JPMorgan advises investors to buy dips in international (non-US) stocks as American market dominance wanes, maintaining that "Goldilocks" conditions persist for equities in 2026.

Market Performance Data:

• International markets outperformed the US by 12% in 2025
• Non-US stocks lead by 8% year-to-date in 2026
• Mag-7 tech giants have "stalled" despite strong earnings

Investment Thesis:

JPMorgan argues the growth-inflation mix remains favorable for equities, citing solid activity data, softening inflation, declining long-dated bond yields, and resilient earnings. Fed funds futures price in additional easing despite strong ISM readings and robust payroll data.

Market Dynamics:

The bank expects leadership to broaden away from mega-cap technology stocks toward small caps, value stocks, and international equities. JPMorgan believes US indices may struggle if Mag-7 stocks don't reassert dominance, stating "If Mag-7 does not retake the lead, it is unlikely US stocks will be able to, too."

Risk Factors:

Potential market pullbacks could stem from geopolitical tensions (including US military buildup around Iran) or tariff headlines. However, JPMorgan views these derisking episodes as temporary and advises treating them as buying opportunities.

Valuation Support:

The continued outperformance of international stocks is justified by extreme positioning favoring US markets, elevated concentration in Mag-7 stocks, and significant valuation differentials between US and non-US equities.

Outlook: JPMorgan expects international stock outperformance to have "legs" throughout 2026, representing a structural shift after years of US market leadership.