JPM Equity Thematic Strategy

J P M O R G A N Global Markets Strategy 28 July 2026

Equity Thematic Strategy Reiterating Healthcare, Risk/Reward Attractive, High Conviction Franchise and Innovation Ideas

Healthcare offers a rare combination of durable growth, Technology-like Global Equity Strategy profitability, attractive valuation and diversification benefits at a time when many Dubravko Lakos-Bujas AC investors remain heavily concentrated in the AI theme. For much of the past three ( years, investor capital has been singularly focused on AI and AI-adjacent themes, leaving one of the market’s largest and most durable growth sectors increasingly Bhupinder Singh AC overlooked. The US Healthcare sector has experienced one of its deepest periods ( of underperformance in decades, lagging the S&P 500 every year since ChatGPT

launch in 2022 (see Figure 23) and enduring five separate peak-to-trough 0 o v u n S P R & tlirseca5 Kamal Tamboli AC ( drawdown episodes exceeding 10% amidst one of the strongest market rallies (see Figure 13). As a result, Healthcare’s weight in the S&P 500 has fallen to ~9% from H jltir()saec5ohn10> C M %

Head of North America Equity ~16% at its peak (see Figure 5), relegating the sector from the second-largest sector Research W P S h g o 0 tirsec5 &

in the index to the fifth-largest today (see Figure 26). Investor concerns around tirsec5 W & P S h g o 0

drug pricing reform (e.g. IRA or MFN), reimbursement pressures, Medicaid cuts Ken Goldman ( and policy uncertainty (e.g. DOGE, tariff, ACA exchange policy, etc.) have weighed heavily on sentiment. At the same time, Healthcare has become a Head of North America Equity preferred funding short against some of the market’s most crowded AI-related Research Product Management longs (e.g. 3M rolling correlation with Tech at extreme negative levels). This has William Funke resulted in one of the largest positioning resets in the sector’s history (Healthcare ( at ~14%ile vs. long term history), also suggesting AI disruption risk is not only better understood but more fully priced in. With valuations still favorable J.P. Morgan Securities LLC (26%ile vs. market) and earnings growth poised to accelerate materially in 2027, we believe the sector is approaching a more durable inflection point. Additionally, a potential gridlock outcome in the coming midterms could alleviate concerns around policy uncertainty, while the bar remains low for potential upside surprise from AI productivity improvements. Performance Lookback of Health Care Franchise and Innovation Baskets • This thematic report is a joint effort between Equity Strategy and Healthcare Since 2025, Rebased 100 Research teams. It includes investment theses for all major Healthcare sub- 170 J. P. Morgan Health Care Franchise (JPRHFRA2) vs. S&P 500 Equal-Weighted (SPW) J. P. Morgan Health Care Innovation (JPRHINO2) vs. S&P 500 Equal-Weighted (SPW) sectors along with two baskets based on JPM stock analysts’ views: (1) JPM 160

150 J. P. Morgan Top 30 AI/Datacenter Beneficiaries (JPRAID30) vs. S&P 500 Equal-Weighted (SPW)

Healthcare Franchise (JPRHFRA2 <Index>) is a higher Quality basket 140

expected to outperform S&P 500 Healthcare sector (see Figure 1); and (2) JPM k n .ltir(I)Jsaeco g M A H R B C > < F P x d 2 h

Healthcare Innovation (JPRHINO2 <Index>) is a higher Growth basket 100 94 90

with more attractive long-term risk/reward relative to other speculative growth 80 Jan-25 Mar-25 May-25 Jul-25 Sep-25 Nov-25 Jan-26 Mar-26 May-26 Jul-26

themes after the sharp underperformance (see Figure 2). We expect the next n g .ltirI()Jsaeo M O N H R B C > < P x d 2 k v h

phase of the recovery to be increasingly driven by stock selection. Detailed Source: J.P. Morgan Equity Strategy and Global Thematic Research, Bloomberg Finance L.P. Past performance is not investment cases for each basket constituent can be found in the industry indicative of future returns sections that follow. Crowding in Healthcare and Technology Crowding in Tech Sector (cap-bias) at 80.2%ile

Reiterating Healthcare. Following one of the deepest periods of Crowding in Health Care Sector (cap-bias) at 13.8%ile

underperformance in decades, we have been turning more constructive on the 100

sector…