Grace Peters, co-head of global investment strategy at JPMorgan Private Bank, asserts that current stock valuations, even at all-time highs, are justified. She highlights a 12% increase in non-AI capital spending by companies as a key driver, alongside robust profit growth broadening across sectors, sizes, and regions. Peters told Bloomberg Television that companies are investing in themselves at the fastest pace in years, driven by national security, reshoring, and AI buildout, indicating a sustained equity bull market.
Peters identifies inflation, global fragmentation, and artificial intelligence as the three primary forces reshaping markets, noting that inflation is now structurally higher. While maintaining a positive outlook on equities, she advises investors to incorporate protective measures into their portfolios. Her recommended hedges include real assets, gold, and infrastructure, which she describes as tangible assets that retain value when "paper money loses it." This strategy reflects a concern that traditional bonds may not serve their historical role as portfolio stabilizers.
JPMorgan's broader analysis indicates that equity markets can generally absorb gradual, growth-led increases in bond yields, but rapid shifts are more disruptive. The firm notes that the S&P 500 has remained resilient despite rising real yields, largely due to strong corporate earnings and AI-related investment. Corporate balance sheets are underleveraged, with net debt-to-equity ratios 20-40% below historical averages, and over 80% of global companies are expected to post positive earnings-per-share growth in 2026. This strong corporate health provides a cushion against the increasing cost of capital, although the bank acknowledges that the balancing act becomes more challenging if real yields continue to climb significantly.
