JPMorgan Chase's trading desk, which has been "most accurate in the past two years," has turned bullish.

JPMorgan Chase's Market Intel Desk, renowned for its accurate identification of market turning points over the past two years, has once again issued an important signal— shifting from "tactical cautious/neutral" to "tactical bullish." This shift comes just before a crucial window of concentrated macro and micro data releases, drawing widespread market attention.

The latest report indicates that the trading desk attributes its shift in stance to five key pillars: better-than-expected macroeconomic fundamentals, continued consumer resilience, low earnings expectations, stabilizing bond yields, and improved technical indicators . Simultaneously, the trading desk has adjusted its strategy, moving away from its previous long Nasdaq 100 (NDX) and short Russell 2000 (RTY) pairing trades and instead favoring derivatives instruments to express its views.

It's worth noting that this trading desk's most recent position adjustment occurred on August 31st, when it shifted from bullish to "tactical cautious/neutral." Since then, the S&P 500 index has remained largely flat, while its recommended long NDX/short RTY pair trade has accumulated gains of over 8%, and US stocks as a whole have outperformed other major markets. This renewed shift to bullish indicates that the team believes the short-term market risk-reward ratio has significantly improved.

Accurate predictions back the signal, making the "buy" signal quite substantial.

Over the past two years, JPMorgan Chase's Institutional Market Intelligence Trading Desk's judgments at several key junctures have been validated by market trends, making it a valuable reference for institutional investors.

The most recent shift in stance occurred on August 31, when the trading desk downgraded its view from bullish to "tactical cautious/neutral," citing reasons including uncertainty surrounding Federal Reserve policy, positioning structure, widening credit spreads, seasonal negative effects, and pullback pressure from momentum factors. At that time, the team recommended concentrating positions on a long NDX, short RTY pair trade.

The results confirmed this assessment : since the adjustment, the S&P 500 has remained almost stagnant, while the long NDX/short RTY pair trade has accumulated a gain of over 8%, and the overall performance of US stocks has continued to outperform other major markets. It is against this backdrop that the "bullish" signal has gained stronger market credibility.

Five reasons to support the "bullish" logic

The trading desk systematically elaborated on five core reasons for turning bullish in its latest report:

First, the macroeconomic fundamentals exceeded expectations. The latest flash PMI data shows that economic growth is stronger than market expectations, which is expected to support employment, consumption, and corporate profits. The team emphasized that the S&P 500's earnings per share (EPS) growth is linked to nominal GDP growth, not real GDP, and the current economic level means that market expectations for earnings may be overly conservative.

Second, consumer resilience continues to exceed expectations. Despite market concerns about consumers' ability to withstand inflation and high interest rates, actual consumption data continues to beat expectations, challenging the "K-shaped recovery" hypothesis. Meanwhile, improvements in the labor market are further supporting consumer performance.

Third, there is room for upward revision of earnings expectations. The EPS growth rate for the second quarter of 2026 is as high as 52%, while the market currently expects approximately 29% for the third quarter. The team believes this forecast may be too low—all 11 sectors in the S&P 500 are expected to achieve positive revenue and EPS growth.

Fourth, bond yields may stabilize. JPMorgan Chase interest rate strategist Jay Barry predicts that the 10-year US Treasury yield will rise slightly from 5.18% to 5.20% in the next month, before falling back to 5.05% by the end of the year. Decreasing yield volatility will help alleviate some of the downward pressure on the stock market.

Fifth, the technical outlook continues to improve. Seasonal factors have turned favorable, retail investor participation is expected to increase, and the overall portfolio structure is relatively light, providing room for market upward movement.

A flurry of short-term catalysts; pay attention to the data window.

The trading desk also outlined key catalysts that could trigger market volatility in the near future:

On the inflation front, PCE and ISM manufacturing data will be released this week. The ISM manufacturing price payments component is an important leading indicator of inflation, while the service sector price payments component has a more significant impact. If the data is unexpectedly strong, it could lead to a flattening of the yield curve in a bear market. CPI data will be released on October 14th, and the Federal Reserve's interest rate meeting will be held on October 28th.

In the labor market , improved employment data helps strengthen the growth narrative and consumption logic, but under the current market pricing framework, the logic of "good news is bad news" may once again dominate—strong employment data may prompt the market to further price in expectations of interest rate hikes.

In the AI field , the release of Muse by META has injected new momentum into the topic, and this week's OpenAI Developer Day and Micron Technology (MU) financial report will be important windows for observation.

Strategy Adjustment: Technology Remains the Core Bullish Factor; Pair Trading Shifts to Derivatives

At the operational level, the trading platform has made clear adjustments to its position-holding strategy:

The technology sector remains the core bullish sector , but shorting RTY is no longer recommended as a hedge, because further declines in oil prices and yields could trigger a short squeeze in RTY. The team suggests instead using derivatives to express this short squeeze risk exposure.

Within the technology sector, the team anticipates structural diffusion, with semiconductors and "Mag 7" constituent stocks expected to outperform the overall technology sector . While the software sector lacks consensus, it is slowly gaining popularity and is seen as a non-consensus bullish opportunity. The sustainability of the AI theme is recognized, and the team recommends maintaining exposure to related stocks.

Beyond the technology sector , the team believes that for cyclical sectors to experience a sustained rebound, a steepening of the yield curve is needed. In non-AI-related sectors, bank stocks are favored due to benefits from economic reopening, potential yield curve steepening, and improved capital market prospects.

For interest rate-sensitive sectors—real estate, telecommunications, and utilities—the team believes that these sectors may be eligible for a short squeeze, but will likely continue to underperform the S&P 500 (excluding AI-related stocks).

The team points out that the biggest potential catalyst is a deal between the US and Iran, which would drive European stock markets and the RTY index significantly higher. In addition, the post-COVID-19 recovery theme (airlines, automobiles, cruise lines, consumer discretionary, hotels, etc.) is also worth paying attention to, and it is recommended to prioritize positioning through options.

Long-term risks remain, and a "bullish" stance is not unconditionally optimistic.

Despite a shift to a bullish short-term stance, the trading desk still clearly outlined several lingering medium- to long-term concerns:

First , has the bond market underestimated the end of this round of Fed rate hikes? If the economy expands at a real growth rate of 5% as indicated by the flash PMI, and inflationary pressures continue to rise, coupled with continued improvement in employment pushing up wage inflation, a more aggressive rate hike path may be needed.

Secondly , will the market begin pricing in a 50-basis-point rate hike by the Federal Reserve at some meeting?

Third , when will agricultural inflation transmit to core inflation?

Fourth , are there other sustainable structural opportunities outside of the technology sector?

The answers to these questions will largely determine whether this "turnaround" can evolve into a more sustainable upward trend or remain merely a tactical short-term rebound.

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