Investing.com -- Stocks may become more attractive to buy in the second half (2H) of 2025, according to JPMorgan strategist Mislav Matejka, who maintains a cautious stance for now amid elevated macro risks, softening data, and continued trade policy uncertainty.
“We continue to think that we would be buyers of risk sometime in 2H,” Matejka said in the bank’s latest strategy note.
However, he added that several conditions would need to be met before turning more constructive, including “the hard dataflow to potentially close the gap with soft data first, for the earnings projections to be reset, for weak guidances to be out of the way, and for the tariffs seesaw to settle over the next few months.”
Soft economic indicators—such as consumer sentiment, future output expectations, and labor market perceptions—have been deteriorating, even as some hard data, like industrial production and job gains, remain resilient.
Weekly earnings revisions have dropped to their weakest levels in years, and the number of announced job cuts has reached recessionary levels. “Challenger job cuts are at levels which were historically associated with recessions,” the note highlights.
Meanwhile, trade remains a major overhang. While recent headlines suggest a partial pullback from some of the most extreme tariff proposals, Matejka warns that “one is still likely to end up with tariff levels much higher than most expected at the start of the year.”
JPMorgan economists estimate that current proposals could lift the effective U.S. tariff rate to 23%, equating to a $730 billion tax increase, or 2.4% of GDP—potentially the largest since World War II.
Against this backdrop, Matejka believes equities may struggle to sustain any rallies in the short term. “We believe that one should stay cautious on risk,” he wrote, citing the combination of trade and fiscal headwinds, earnings downgrades, and higher inflation expectations.
Still, the strategist sees a more favorable backdrop potentially emerging later this year, especially if trade tensions ease and the Federal Reserve begins to shift its policy stance.
Regionally, Matejka believes international markets currently offer a better risk-reward profile than the U.S., with the potential to outperform in both recessionary and recovery scenarios.
If growth weakens, non-U.S. equities may hold up better than usual, and if tariff tensions ease, they could see stronger upside, he said.