BlockBeats news, on June 25, JPMorgan raised its year-end outlook for the U.S. stock market but cautioned investors that the overcrowding in AI-related momentum stocks is becoming the market's most vulnerable area.
Led by Dubravko Lakos-Bujas, JPMorgan’s strategy team raised its S&P 500 year-end 2026 target from 7,600 to 7,800, citing continued upward revisions to corporate earnings forecasts and AI-related capital expenditures nearing a doubling. The bank noted that consensus earnings estimates for 2026 and 2027 have both risen by approximately 10% since the beginning of the year—a magnitude typically seen only during recoveries following recessions or major shocks.
However, J.P. Morgan did not interpret this upward adjustment as a risk-free rally. The bank noted that low-quality growth stocks, speculative growth stocks, and secondary AI-themed stocks have become "extremely crowded," and a withdrawal of capital could trigger a rapid correction. Strategists also mentioned that increased equity supply over the coming quarters and potentially tighter monetary policy could limit further valuation expansion.
In terms of allocation, J.P. Morgan recommends a barbell strategy: one end holds high-quality growth stocks and direct AI beneficiaries, while the other end allocates to low-volatility, high-quality stocks as a portfolio buffer. The bank remains bullish on technology, select industrials, utilities, defense, banking, and certain healthcare growth stocks, but believes the market’s upward path will not proceed in a linear fashion.