JP Morgan Strategist on AI Jitters, Investing Outlook

JPMorgan Asset Management strategist Jordan Jackson says third-quarter earnings results are expected to be strong, with forecasts for 27%–28% year-over-year growth. He discusses whether earnings growth may be nearing a peak even if results are not deteriorating.

Analysis

A growth-rate peak is not an earnings peak: even if year-over-year growth decelerates, absolute profits can keep rising. The market risk is instead a mismatch between the earnings level already embedded in prices and the next leg of revisions. Strong reported results may fail to lift equities if forward guidance, estimate breadth, or margins disappoint; that would pressure valuation-sensitive growth stocks more than it would signal an immediate recession. Over the next 1–3 months, track forward EPS revisions and the share of companies raising guidance, not headline beats alone. Over 6–18 months, the thesis becomes more consequential only if slower growth reflects persistent cost pressure, weaker demand, or tighter financing conditions. The contrarian case is that investors may overreact to deceleration: a still-positive earnings trajectory can support equities if revisions remain broad. This is a low-conviction signal on its own. It is falsified by broadening upward revisions and stable or improving guidance; it gains credibility if revisions turn negative across sectors and equity prices weaken despite reported beats.

Key Decisions for Investors

• Do not initiate a broad equity short solely on the possibility that earnings growth has peaked. Treat the observation as a reason to demand stronger forward guidance before adding risk, rather than as evidence that profits are already contracting.
• Over the next earnings cycle, monitor forward EPS revision breadth, guidance changes, and margin commentary. If results beat but revisions and guidance weaken, reduce broad-market beta; if revisions broaden, the deceleration concern is not a sufficient sell signal.
• Conditional hedge: if revision breadth deteriorates and the S&P 500 fails to respond positively to earnings beats, consider a defined-risk SPY put spread rather than an outright short. The hedge is invalidated by improving revisions and a sustained positive price response; option cost and expiry should be set against the actual catalyst calendar.
• No standalone trade is warranted from this interview alone: it supplies a growth-rate concern, but not company-level estimates, positioning, valuation, or evidence that expectations are mispriced.