JPM Equity Strategy

J P M O R G A N Global Markets Strategy 17 August 2026

Equity Strategy Updating on key market themes

• We maintain a positive stance on the equity market, expecting continued Equity Strategy supportive Growth - Inflation tradeoff, with corporate earnings a tailwind. Mislav Matejka, CFA AC Internal participation is broadening, and Cyclical sectors are likely to keep ( rallying. We look for new highs at index level into year end, including for SXXP. In this report, we refresh our thematic positioning, with focus on Europe. J.P. Morgan Securities plc Prabhav Bhadani, CFA • Reflecting global trends, Europe as well is attempting to move from an ( efficiency and economies of scale targeting model toward a greater focus on security, resiliency, and strategic autonomy. This is driven by continued J.P. Morgan Securities plc geopolitical uncertainty, from Ukraine to Middle East, a more transactional US Nitya Saldanha, CFA policy stance, and intensifying China competition. The implication for markets ( is a longer lasting policy supported capex cycle that spans defence, energy J.P. Morgan Securities plc systems, grids, industrial capacity, digital infrastructure, and selected critical supply chains. Relative to the US, Europe starts from deeper underinvestment Karishma Manpuria, CFA ( in defence readiness, grid build, and industrial capacity, so the catch up could be meaningful. We address the following thematic groups: 1) Energy security, J.P. Morgan India Private Limited Grid upgrade, Renewables and Nuclear. The post-REPower EU drive to cut Anamil Kochar, CFA strategic energy dependence, alongside critical raw materials and net zero ( industry measures, is actively pushing domestic capacity higher. J.P. Morgan India Private Limited • 2) German fiscal expansion and Infrastructure upgrade. Germany's constitutional debt-brake release has unlocked greater funding for defence and infrastructure projects, anchored by the EUR 500bn special infrastructure and European energy grid investments are picking up climate fund. 900

• 3) Strategic Technologies. The focus is on AI buildout & industrial automation. 600

• 4) Defense Modernization. Rising NATO spending commitments and EU- 200

(Main Case) 2025-2030 (Accelerated Case)

level joint procurement and defense-industrial initiatives, such as ReArm Concentrating solar power PV distributed systems PV Utility-scale systems Onshore wind Offshore Wind Geothermal Bioenergy Ocean Hydro

Europe / EDIP-type programs and common munitions replenishment contracts. Germany has been underinvesting relative to others In terms of our stance on the Defense sector, ever since last summer we have been arguing for a rollover, given that the theme became overowned, and have 160

in our February Thematic update continued with a more cautious view on 150

Defense, preferring Banks - see report. Given that Defense stocks spent more 130

than a year struggling to perform - bottom chart, and saw a meaningful derating, 120

we believe that risk-reward for the group is turning better going forward,

but with a focus on new capabilities, rather than on legacy businesses. Euro area ex Germany and Ireland - Fixed investment excluding residential construction (rebased to 100) Germany US

Defense stocks have struggled to perform for more than • 5) Increased EU protectionism. On protectionism and sovereignty, Europe's a year now. We moderate our longstanding caution on preference for standards and regulation over simple tariffs is already visible in the group from here, and would focus the upside on Defense modernization parts the Carbon Border Adjustment Mechanism (CBAM), local content 300

requirements in wind, grids, defense, foreign subsidy screening, and anti- 280 260

subsidy actions on EVs, solar and wind.

• Out of other potential themes, even as they might not be a focus in the short term,

we mention Aging Population and Ukraine Reconstruction and Eastern 100 Jan-24 Apr-24 Jul-24 Oct-24 Jan-25 Apr-25 Jul-25 Oct-25 Jan-26 Apr-26 Jul-26

European defense champions basket relative to Stoxx 600

European Buildout. Across all seven groups, the physical infrastructure layer Source: J.P. Morgan, Bloomberg Finance L.P., Datastream is the most investable…