Policy has gone from an acute to chronic issue for market indices, says JPMorgan's Gabriela Santos

Market Overview & Strategy - JP Morgan's mid-year check suggests a less bullish outlook than the market's rapid recovery might imply [1][4] - The firm believes it's difficult to have a wholesale bullish overweight view across the board in the US, but opportunities exist in specific asset classes [5] - JP Morgan suggests focusing on asset classes that haven't rallied as much or where performance hasn't translated into flows and positioning [5] Policy & Economic Factors - Policy has transitioned from an acute to a chronic issue for markets, influencing specific stock or asset class performance rather than driving daily headlines [3][6] - Recession risk has decreased since early April, with a macro environment conducive to high single-digit earnings growth [4] - The market has largely priced in the current trade environment, with average tariff rates at 15%, five times higher than before the trade issue began [11] Investment Opportunities - JP Morgan maintains interest in international performance, particularly in Asia (Japan, India), despite Europe's recent dominance [6] - Financials in the US present an opportunity due to the potential for a steepening yield curve and business-friendly regulation [6][8] - Lowering the supplementary leverage ratio for financials could free up lending and decrease the burden of holding treasuries [9] Risk Assessment - A significant escalation of the trade war, deviating from the base case, could raise recession risk and necessitate repricing [10] - While policy issues are viewed as chronic, there's a possibility that positive policy tailwinds are being underestimated [7]