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J.P.Morgan, Morgan Stanley urge buying the dip as US earnings stay resilient
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J.P.Morgan, Morgan Stanley urge buying the dip as US earnings stay resilient
Apr 13, 2026 9:07 AM

April 13 (Reuters) - Wall Street brokerages J.P.Morgan and Morgan Stanley said recent market weakness has created opportunities for long-term investors, arguing that resilient corporate earnings growth could cushion the fallout from the Middle East conflict.

Hopes of a de-escalation in the conflict have lifted the S&P 500 nearly 8% from a seven-month low it hit in March, after fears that an oil price shock stemming from the closure of the Strait of Hormuz would stoke inflation and deepen economic uncertainty.

The benchmark index advanced nL4N40W10M slightly on Monday even as weekend talks between the U.S. and Iran failed to deliver a deal to end the war.

"Our base case remains that any further escalation is unlikely to be sustained indefinitely, and that dips driven by geopolitical shocks should ultimately prove to be buying opportunities," J.P.Morgan said in a note led by strategist Mislav Matejka.

The benchmark U.S. index dropped as much as 8% since the U.S.-Israel war against Iran broke out, stopping short of confirming it is in correction territory - a 10% drop from record close levels.

Reviving the safe haven appeal of U.S. stocks, the S&P 500 still outperformed Europe's STOXX 600, which fell as much as over 11%, and MSCI's index tracking emerging market equities, which confirmed correction territory.

Morgan Stanley strategists led by Michael Wilson said the recent selloff in the U.S. S&P 500 looked more like a correction than the start of a prolonged downturn, and attributed the support to improving earnings growth and healthier valuations.

Earnings expectations have continued to increase despite the conflict. The earnings growth rate estimate for the S&P 500 stood at 13.9% for the first quarter of 2026 as of April 10, compared with estimates of a 12.7% rise before the war broke out, per LSEG I/B/E/S data.

Goldman Sachs struck a similar tone in early March, warning of near-term "correction risks" to global stocks but saying there was little room for a bear market nL4N3ZS17J.

Morgan Stanley said it continues to favor cyclical sectors such as financials, industrials and consumer discretionary goods and also quality growth stocks such as AI hyperscalers.

J.P.Morgan also noted that the valuation premium for the so-called "Magnificent Seven" cohort of stocks had narrowed sharply, with their forward price-to-earnings ratio for the group falling to 1.2x the S&P 500 from 1.7x.

Morgan Stanley had downgraded global equities nL4N40I0GY late in March, while J.P.Morgan reiterated its preference for international equities over the United States in its latest note.

(Reporting by Purvi Agarwal in Bengaluru; Editing by Devika Syamnath)

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