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ROTATION INTO VALUE NOT OVER YET - JPM

Value stocks are outperforming growth so far in 2026, by 2% in Europe and 11% in the United States. According to JP Morgan, this rotation - along with a few other notable ones - has further to run.

In Europe, the outperformance of value stocks is even more stark when looking back to January 2025. Since then, a value basket .MIEU0000VNEU is up 40% versus a 15% rise for growth stocks .MIEU0000GNEU.

State-side, value names lagged for most of last year but in recent months have staged "a sharp reversal" to outperform growth by nearly 17% since early November 2025, JPM says.

"We believe these trades have further to run, given the extreme nature of their prior underperformance."

In a similar vein, small caps are outperforming in both regions. JPM prefers them over large caps.

Meanwhile, a recent pullback in cyclical comes after a good run, and is a buying opportunity according to the equity strats.

EM equities are also having their moment.

"Strong inflows into EM equities have underpinned the region's robust performance. EM equity net inflows reached $29.2 billion in 2025 - the highest annual inflows since 2021," says JPM.

EM is still significantly underowned in the average portfolio and is benefitting from widespread monetary easing across most EM central banks as well as dollar weakness.

And within developed markets?

"...U.S. equities have underperformed both Japanese and European stocks - a trend we expect to persist," JPM says.

Japanese equities should benefit from the expansionary fiscal policies under the Takaichi administration, they say, while euro zone stocks offer compelling relative valuations, light positioning and stand to gain from increased fiscal spending.

Better European earnings ahead are also a boon.

(Lucy Raitano)

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EARLIER ON LIVE MARKETS:

MINERS' CAPEX SIGNALS KEEP BOFA WARY ON EQUIPMENT MAKERS CLICK HERE

TECH DRAGS STOXX LOWER AS TRADE CHAOS WEIGHS; UTILITIES RISE CLICK HERE

BEFORE THE BELL: EUROPEAN FUTURES INCH LOWER CLICK HERE

COUNTING THE COST OF TARIFF CHAOS CLICK HERE