JPMorgan strategists said current corporate fundamentals could help limit the effect of rising bond yields on global equities, citing profit margins above historical averages, relatively low leverage and broader earnings growth.
Equity markets have declined as Brent crude moved above $100 and the U.S. 10-year Treasury yield approached 5%, but strategists led by Mislav Matejka said the market impact has remained “limited.”
The S&P 500 is around 2% below its August highs, while the Stoxx 600 has declined approximately 3% to 4% from its record closing level.
JPMorgan characterised the recent performance as “a market digesting an oil and rates shock, rather than repricing a collapse in earnings.”
The bank acknowledged that volatility could persist in the near term, citing historical September seasonality and continued geopolitical uncertainty. Its strategists nevertheless expect markets to move closer to underlying fundamentals during October.
Earnings Growth Extends Beyond Technology
One factor supporting JPMorgan’s view is the level of corporate profitability.
The bank said profit margins in the U.S., Europe and Japan are “generally very healthy” and remain above their respective long-term averages.
Most companies across these regions are on track for a strong or record year of profitability in 2026, according to the strategists.
JPMorgan also noted that margins have historically reached their peaks an average of eight to nine quarters before economic downturns. The latest available figures, from the second quarter, showed margins reaching new highs.
Earnings growth has also broadened beyond technology, according to the bank. More than 80% of companies globally are now expected to deliver positive earnings-per-share growth in 2026.
European margins also remain above historical averages despite pressure on the consumer discretionary sector from weakness in the automotive industry.
Debt Profiles Could Delay Impact of Higher Rates
Corporate leverage provides another element of JPMorgan’s assessment.
The bank said net debt-to-equity ratios are generally running 20% to 40% below historical averages. At the same time, corporate debt has an average duration of approximately five to six years.
This debt profile means changes in prevailing interest rates do not necessarily translate immediately into higher borrowing costs across the corporate sector, as refinancing occurs over time.
JPMorgan’s credit strategists also expect forthcoming corporate issuance, including debt associated with artificial intelligence investment, to be absorbed by the market.
