Huo Xing Finance reports that, on August 4, J.P. Morgan’s latest report maintained its bullish stance on the “Technology + Cyclical” allocation strategy, while recommending the addition of healthcare as a third investment theme to reduce overall portfolio sensitivity to macroeconomic factors. The report noted that the technology sector currently presents an oversold rebound opportunity: the forward P/E ratios of the U.S. “Magnificent Seven” (excluding semiconductor companies) have fallen below the 2018–present average by more than two standard deviations, suggesting a potential 56% upside upon mean reversion. J.P. Morgan believes market concerns over AI investment returns are overblown; large-scale cloud providers have seen backlog growth of approximately 150%, outpacing capital expenditure growth of around 80%. The firm sees value in mean-reversion opportunities for AI-related assets, with particular focus on AI targets in South Korea and other Asia-Pacific markets. Regarding cyclical sectors, J.P. Morgan recommends shifting from financials and consumer stocks to industrials, as industrial companies are expected to benefit from global economic improvement, earnings recovery, and valuation re-rating driven by AI themes. Additionally, the report advises allocating to the healthcare sector as a defensive asset due to its low correlation with macroeconomic cycles, helping to reduce portfolio volatility. For emerging markets, J.P. Morgan tactically favors Hong Kong-listed Chinese equities, anticipating they will benefit from AI infrastructure development and commercialization trends, though their performance has lagged behind South Korea, Taiwan, and A-shares. The report also suggests investors consider taking partial profits on certain AI supply chain names that have experienced excessive gains and become over-allocated. The report further recommends monitoring Asian refining companies, as geopolitical uncertainties are pushing refining margins in Asia to historical highs.
JPMorgan Maintains 'Tech + Cyclical' Stock Allocation, Recommends Adding Healthcare to Reduce Risk
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Summary
JPMorgan updated its daily market report on August 4, 2026, maintaining its 'tech + cyclical' stock allocation while adding healthcare to diversify risk exposure. The report notes that the forward P/E ratio of seven major U.S. tech firms is two standard deviations below the 2018 average, indicating potential upside of 56%. AI-related assets are viewed as undervalued, with hyperscale cloud backlogs up 150%. Cyclical exposure is shifting toward industrials, and healthcare is highlighted for its low correlation with macroeconomic trends. Chinese H-shares are preferred in emerging markets.
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