Eben@CANSLIM ResearchJ.P. Morgan has reiterated a constructive stance on global risk assets after the Federal Reserve delivered its first rate hike since 2023, raising the target range by 25bp to 3.75–4.0%. The bank’s cross-asset team argues the move removes credibility concerns and caps term premia, even as the front end reprices higher, and it has lifted its year-end Treasury targets to 4.70% on 2Y USTs and 5.05% on 10Y USTs. Large Cap, Quality Growth and Technology equities remain the preferred expressions of the view, with credit seen as the most resilient asset class to further hikes.
Key Takeaways
- J.P. Morgan expects the Federal Reserve to hike another 25bp in December, with risks tilted towards a third hike in early 2027 if resilient growth and sticky inflation persist.
- The bank raised its year-end Treasury forecasts to 4.70% for 2Y USTs and 5.05% for 10Y USTs, up 40bp and 20bp respectively from prior projections.
- J.P. Morgan’s beta analysis shows Communication Services (+6% beta, R²=56%) and Information Technology (+3% beta, R²=14%) as the S&P 500 sectors with positive sensitivity to 1Yx1Y SOFR, alongside Energy (+7% beta, R²=52%).
- MSCI US Small Cap (-8% beta, R²=81%) is the most rate-exposed style factor, underperforming the broader index by -3.4%, while MSCI US Large Cap shows a near-zero beta of -1%.
- Brent crude at $100–110/bbl is unlikely to be sustained above $100 even in a “forever conflict” scenario, with J.P. Morgan’s baseline forecast at $78/bbl.
What J.P. Morgan’s Cross-Asset Team Actually Said
In a report titled “Pack Your Boots: The Global Rate-Hike Trail Just Reopened”, J.P. Morgan’s cross-asset strategy team — led by Dubravko Lakos-Bujas alongside Nikolaos Panigirtzoglou, Mika Inkinen, Jainik Mody, Lara Bes and Montana Manelski — argues that developed-market central banks are shifting into a more synchronised tightening phase. The Fed’s hike was joined by another Bank of Japan move, bringing the ECB, RBA, RBNZ and Norges Bank onto the tightening path, with the Riksbank and Bank of England expected to follow later this year. The Bank of Canada is left as the lone DM holdout.
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