JPMorgan continues to expect further absolute gains from the Magnificent Seven, characterizing the recent retreat in the megacap cohort as a buying opportunity driven by positioning and technical pressures rather than by a change in fundamentals.
In a note circulated on Monday, strategist Mislav Matejka wrote that the firm had advised clients to add to Mag-7 holdings in March. The subsequent decline, he said, appears linked to "elevated positioning and extreme technicals related, together with some IPO anxiety, rather than a fundamental change in the backdrop." JPMorgan views this weakness as one that can be used to buy into the group.
That bullish stance comes with a clear caveat. The bank warned that the market is displaying "extreme market concentration," which raises the prospect of further pullbacks. JPMorgan also pushed back on the notion that mega-cap technology will necessarily dominate the second half of the year in the same fashion it did in parts of 2025.
JPMorgan highlighted the narrowness of the recent advance, noting that market breadth has been at "record lows of late." The firm said it will be watching for a broadening of market participation in the second half of the year, a development it considers important for a more durable rally.
Looking at sector implications and tactical positioning, the bank reiterated a bullish view on Cyclicals heading into 2026 and flagged Europe as poised to "catch up" in the latter half of the year. On the defensive side, JPMorgan suggested that low-volatility stocks, which have suffered a 19% year-to-date drawdown, could recover partially if bond yields fall; however, it does not expect such a rotation to have lasting momentum in the second half.
JPMorgan also pointed to nascent signs of rotation into Consumer names. Subsections within Consumer - specifically Luxury, Airlines, and Hospitality - have recovered off their lows, and the firm identified Consumer as "the one Cyclical subgroup which is yet to rally." The bank argued that a meaningful rotation into Consumer could prove painful for consensus positioning given how underinvested the area has been.
Summing up its guidance on market positioning, Matejka said: "At the overall market level, since 2H of March we kept advising to use any weakness to buy, and stay with it."
Sectors and market areas discussed:
- Technology mega-caps (Magnificent Seven)
- Cyclicals and Consumer subsectors (Luxury, Airlines, Hospitality)
- European equities
- Low-volatility stocks and bond-yield sensitivity