The global stock market will be "hard to endure" in the next three months

Under the uncertainty of Trump's policies, JPMorgan believes that global markets will experience a "painful period" in the next three months.

On March 31, JPMorgan analysts Eduardo Lecubarri and others pointed out in a research report that since the beginning of the year, the variability of White House policies has led to a decline in the visibility of the global economic outlook and increased downside risks. These negative factors have not yet been fully reflected in stock market performance, with the S&P 500 index only down 5.1% so far.

At the same time, Germany's spending plans provide a relative advantage for the euro and EU stock markets, but they do not represent structural changes.

Global Stock Markets Face Challenges in Three Months

JPMorgan's strategy report indicates that the market consensus for early 2025 is overly optimistic, which increases market risks. The report predicts that the market will face pressure for at least the next three months, primarily based on the following reasons:

Uncertainty of Trump administration policies: The unclear direction of White House policies affects not only the U.S. economy but also the global economic outlook.

Weak first-quarter performance: Some companies may take the opportunity to adjust performance expectations and engage in "performance washing," forcing investors to adjust their positions accordingly.

Investors have not fully acted: Feedback from nearly 100 CEOs and investors at JPMorgan's pan-European forum shows that while they are aware of rising risks, they have not yet taken action based on this awareness.

Adjustment of policy expectations: The Trump administration may disappoint the stock market on April 2 to lower market expectations and build momentum for next year's midterm elections, which could further impact stock market performance.

Therefore, JPMorgan expects that small and mid-cap stocks and the overall stock market will perform poorly in the next three months.

Germany's Spending is Not a Structural Turning Point

JPMorgan believes that while Germany's spending plans may provide some relative advantages for the euro and EU stock markets, this does not represent a long-term structural change.

The report points out that Germany's plans have failed to meet expectations. Even if Germany's spending doubles, bringing its government debt/GDP ratio to 100%, and other European countries take similar measures, the impact on the market will be minimal, limited to European defense stocks.

JPMorgan analysts argue that only when Germany (and Europe) adjusts its plans through more proactive economic measures, such as cutting corporate taxes and incentivizing R&D, can the so-called "intergenerational change" be achieved.

Advise Investors to Maintain a Cautious Stance

JPMorgan strategists advise investors to remain cautious in the next three months, focusing on stocks with the following characteristics:

Achievable expectations: Avoid stocks with analyst expectations of significant growth that are difficult to achieve.

Revaluation upside potential: Choose stocks that still have valuation improvement potential in the current market environment.

Certain defensiveness: Select stocks that can perform well whether the market is rising or falling