JPMorgan Sees S&P 500 Rising Despite Tariff Headwinds, Highlights Three Bullish Catalysts

JPMorgan remains optimistic about U.S. equities, forecasting a high single-digit return for the S&P 500 over the next 12 months—even as concerns mount over the economic fallout from President Donald Trump’s tariff-driven trade policies.

According to a Friday market note from the bank’s wealth management division, three major factors are driving its bullish outlook.

Markets Look Past Economic Weakness

Despite signs of slowing growth, markets have remained resilient. Since President Trump initiated a new round of tariffs on April 2, economists have revised U.S. GDP forecasts for 2025 downward—from 2.3% to just 1.5%. Yet the S&P 500 has surged more than 28% in that time, shrugging off softer labor data, weak consumption, and persistent inflation in manufacturing and services.

JPMorgan attributes this divergence to investors’ focus on corporate earnings strength rather than macroeconomic risk, suggesting that a potential recovery narrative is taking precedence over near-term economic concerns.

Strong Corporate Earnings Drive Momentum

The second pillar of JPMorgan’s bullish thesis is robust corporate earnings. Over 80% of S&P 500 companies have reported Q2 results, with 82% beating earnings expectations and 79% surpassing revenue forecasts—the strongest showing since Q2 2021.

This widespread outperformance has pushed the index’s projected earnings growth for the year from below 5% to approximately 11%, supporting a broader market uptrend.

“The full-year earnings expectations for both this year and next are already being revised higher,” JPMorgan analysts noted. “Markets are increasingly distinguishing between companies poised to benefit and those at risk in this evolving trade environment.”

Large Corporations Weather Tariff Pressure

JPMorgan’s third catalyst centers on the relative immunity of large firms to Trump’s tariff regime. While smaller, consumer-focused companies with limited pricing power are struggling, mega-cap corporations are faring much better.

Many large firms have either secured exemptions or adapted their supply chains to mitigate the impact. In some cases, they’ve even leveraged tariff policies to their advantage.

A prime example: Trump’s proposal to impose a 100% tariff on imported semiconductors unless companies shift production to the U.S. While controversial, firms like Apple have not only received exemptions but also announced major investments in domestic manufacturing. Apple shares climbed nearly 9% this week following its pledge of an additional $100 billion in U.S. factory spending.

Further boosting sentiment is the One Big Beautiful Act (OBBA), which allows companies to immediately expense qualified business property and domestic R&D. Analysts suggest this could increase free cash flow by over 30% for eligible firms, potentially fueling additional investment.

Given this backdrop, JPMorgan continues to favor large-cap equities, with an overweight allocation to the technology, financials, and utilities sectors—industries the bank sees as well-positioned to outperform in the current policy and market environment.

Crypto Could Benefit from Equities Rally

JPMorgan’s constructive stance on equities may also have positive implications for cryptocurrencies, which often move in tandem with risk assets.

Adding to the crypto market’s momentum are regulatory tailwinds: the Trump administration has appointed crypto-friendly officials to key agencies, and the SEC recently ruled that certain forms of liquid staking do not fall under existing securities laws.

The decision has renewed optimism around the approval of staking-based ether ETFs. Ether has surged more than 13% this week to above $4,200, reclaiming levels not seen since 2021. Prices have jumped nearly 50% over the past month, according to CoinDesk data.