JP Morgan analysts see shoots of growth, and not just among the 'Mag 7' tech stocks

JPMorgan analysts say earnings growth is broadening beyond the Magnificent Seven, noting S&P 500 companies excluding the MAG7 delivered about 12% earnings growth, while Eurozone Q3 earnings were modestly up 1% year‑on‑year. They expect Eurozone profitability to improve in 2026—supported by stronger growth, fewer FX headwinds, improved Chinese demand and easier financing—but warn consensus forecasts (c.15% EPS growth) may be optimistic versus their median ~10% view; nonetheless missed consensus would not preclude earnings acting as a market tailwind. Autos within consumer discretionary are seen as a significant contributor, and JPMorgan anticipates continued rotation into lagging sectors and recommends buying dips amid a stable activity-and-rates backdrop.

Analysis

J.P. Morgan analysts report that earnings growth is broadening beyond the Magnificent Seven, with S&P 500 companies excluding the MAG7 delivering roughly 12% earnings growth — the best rate in years — while Eurozone Q3 earnings were modestly up about 1.0% year‑on‑year. The bank expects Eurozone profitability to improve in 2026 supported by stronger economic growth, fewer FX headwinds, improved Chinese demand and easier financing conditions, but notes consensus 2026 EPS forecasts (around 15%) may be optimistic versus a median closer to 10%. A meaningful portion of the projected improvement is expected to come from autos within consumer discretionary, and JPMorgan explicitly flags continued market rotation into lagging sectors. Analysts recommend buying dips given a stable backdrop for activity and interest rates, though they warn that failing to meet consensus need not preclude earnings acting as a market tailwind and could still create episodic volatility.

Key Decisions for Investors

• Consider modestly overweighting lagging cyclicals — particularly autos and consumer discretionary names with clear 2026 earnings visibility — while trimming concentration in MAG7-style mega-cap tech, Use pullbacks as tactical adding opportunities consistent with JPMorgan’s buy‑the‑dip bias, but size positions to allow for volatility if consensus EPS proves too optimistic, Be selective in Eurozone exposure: prefer companies with limited FX sensitivity, strong balance sheets and direct China demand exposure rather than relying on broad regional beta, Monitor Chinese demand indicators, FX movements and financing conditions as primary triggers to increase risk exposure or initiate hedges