JPMorgan strategists cautioned Monday that slowing global economic growth could weigh on equity market returns, despite record levels of corporate buybacks so far this year.
U.S. companies have announced nearly $1 trillion in buybacks, supported by robust earnings and healthy credit conditions.
“If labour markets were to weaken more meaningfully, and consequently if corporate confidence dips, buybacks could slow from the current record pace,” strategists led by Mislav Matejka wrote.
Surveys of corporate sentiment are already signaling caution. Both the U.S. Business Roundtable and Chief Executive magazine highlight subdued CEO confidence, reflecting uncertainty about the economic outlook.
If labor markets soften further, firms may focus on preserving capital, which would reduce buyback activity. At the same time, rising capital expenditure needs could limit free cash flow available for shareholder returns. Outside of technology, equipment spending has been largely stagnant, though JPMorgan expects investment to increase, supported by fiscal measures such as import tariffs and incentives for U.S. manufacturing.
“Higher capital expenditure spend would curtail the ability of U.S. companies to continue engaging in buybacks at the current pace,” the team added.
Regarding earnings, JPMorgan expects U.S. profit growth to slow after a strong run. While consensus estimates project an 11.2% increase in S&P 500 earnings for 2025, the bank cautioned that “earnings resiliency to fade, profit margins are at risk.” Valuations remain elevated at 23 times forward earnings, leaving little margin for error.
In Europe, the outlook is more positive. Buyback volumes have plateaued, but JPMorgan anticipates earnings growth in 2026 and 2027, supported by fiscal policy adjustments, particularly in Germany. Total shareholder yield in the Eurozone, including dividends and buybacks, already exceeds U.S. levels, making equities in the region more attractive.
“We now think the time is approaching to start adding to Eurozone again,” the report said. The bank has set a December 2025 target of 5,800 for the Euro Stoxx 50, implying roughly 6% upside from current levels.
Strategists also noted that 2025 may see a rotation in market leadership after years of Growth, large-cap, and developed-market outperformance. They see potential for Value and small-cap stocks—especially in Europe and Japan—to regain momentum following three weak years.
Regionally, JPMorgan remains Neutral on developed markets but Overweight emerging markets, citing cheaper valuations, a softer dollar, and stronger Chinese equity performance. Sector-wise, the bank favors Chemicals, Defense, and Metals & Mining, while remaining cautious on Autos and Semiconductors.
This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.