JPMorgan Sees Stagnation Risks for S&P 500 as Inflation and Weak Growth Loom

Strategists at JPMorgan Chase & Co. $JPM highlight growing concerns for the S&P 500 $^SPX as persistent inflation and muted economic expansion threaten to cap gains through the summer. Recent analysis led by Mislav Matejka points to a transition from the index’s early-year rebound toward a period marked by stagnation, shaped by macroeconomic and geopolitical uncertainties.

Inflationary Pressures and Subdued Growth as Key Obstacles

After a robust start to 2025, the US equity market now contends with mounting price pressures and slowing GDP expansion. Rising input costs are compressing corporate margins, dampening forward-looking earnings projections among SPX constituents. JPMorgan strategists note that ongoing inflation, together with sluggish activity, increases the probability of a flat or declining trajectory for the index in the coming months.

Trade Disputes and Tariff Dynamics Add Complexity

Uncertainty over trade dialogues between the US and key international partners is further clouding the outlook for US stocks. The existing regime of tariffs is proving more disruptive than anticipated at the beginning of the year, impacting supply chains and weighing on investor sentiment. Global trade, a crucial driver for several major SPX components, now faces evolving challenges that may limit stock market upside during the summer.

Major Factors Shaping S&P 500 Performance This Summer

1. Persistent price increases are undermining consumer spending and business confidence.

2. GDP growth in the US shows signs of deceleration, directly affecting corporate revenue forecasts.

3. Tariff escalation and trade uncertainty create unfavorable conditions for large-cap exporters.

4. The threat of stagflation is beginning to influence capital allocation and risk perception across sectors.

Structural Impacts on Market Sentiment

As macroeconomic headwinds strengthen and global trade frictions persist, risk appetite appears increasingly constrained. The scenario outlined by JPMorgan suggests the S&P 500 may enter a sideways phase, driven by investors factoring in the dual pressures of inflation and weaker growth prospects. This environment is conducive to choppy trading and heightened volatility, rather than broad-based upside.