JPMorgan Defies Skeptics, Says the Rally Is Built on Earnings, Not Hype
Coming into the second half of 2026, investors have been wrestling with a familiar set of worries. The S&P 500 rally has already been powerful; valuations are no longer cheap, and the market has been juggling Fed uncertainty, stretched positioning, and nagging questions about how much good news is already priced in. Many on the Street expected JPMorgan to strike a cautious tone.
Instead, the bank delivered a blunt verdict that cut against the grain.
In a recent CNBC interview, Stephen Parker, co-head of global investment strategy at JPMorgan Private Bank, made the case that the rally isn't fragile or speculative—it's grounded in earnings. “The move we’ve seen this year has been entirely earnings driven,” Parker said, adding that even the most bullish earnings estimates have been “consistently exceeded.” That shifts the narrative because the initial concern was that stocks were rising on the back of greater optimism, not stronger profits.
JPMorgan's year-end base case stands at 7,800 for the S&P 500, and its bull case rises to 8,900—a target the bank describes as “not much of a stretch.” For context, the 7,800 target already assumes lower valuation multiples from here. If multiples simply hold steady while earnings keep rising, Parker said, the higher bull-case target becomes achievable.
Perhaps more striking is the bank's view on the Federal Reserve. Parker argued that a rate hold is fine for both the base and bull cases, and stocks can even withstand “a couple of rate hikes” as long as earnings hold up. The bigger issue, he added, may be Fed communication—shorter statements, less emphasis on dot plots, and reduced transparency could raise policy volatility, but not enough to knock the bull market off course.
That makes the rally less fragile than bears assume, but not risk-free. JPMorgan still wants market gains to come from earnings, and the real test now is whether profit growth can broaden beyond tech and keep supporting higher stock prices.
The numbers underscore both the opportunity and the risk. FactSet estimates S&P 500 Q2 earnings growth at 22%, up from 18.7% at the start of the quarter, while revenue growth is expected to reach 12.1%—the strongest pace since Q2 2022. Analysts also project 23.3% earnings growth for 2026 and 16.3% for 2027. But concentration is a growing concern. Information Technology earnings are expected to grow 59.6% in Q2, and within that, semiconductors and semiconductor equipment are projected to surge 121%. Strip away the chips, and the sector’s earnings growth rate falls to 25.7%.
That means the broader index still leans heavily on AI infrastructure, chips, and related capital spending—and that is where the next risk sits. Morgan Stanley expects the major hyperscalers to spend roughly $700 billion this year, with capex topping $1 trillion in 2027, according to Reuters. Goldman Sachs recently lifted its S&P 500 target to 8,000, citing stronger earnings, but that optimism assumes corporate profit growth can continue to absorb the cost of the AI buildout.
For positioning, the setup still favors tech, semiconductors, communications, and cyclicals tied to earnings upgrades. Defensive sectors could lag unless investors start questioning margins, AI returns, or the durability of consumer demand.
Related: Morgan Stanley gives Google stock investors reason to rethink AI spending
This story was originally published by TheStreet on Jun 22, 2026, where it first appeared in the Investing section. Add TheStreet as a Preferred Source by clicking here.