2025 has shown the 'power of diversification', says JPMorgan's Phil Camporeale

Market Outlook & Strategy - The market is not priced for perfection but is hoping for good things to happen, particularly with AI spending continuing into 2026 [8][9] - Wells Fargo Investment Institute is leaning towards stocks and took advantage of the pullback in April [9][10] - A 10% pullback was expected 3 months ago, but it hasn't happened [10] Interest Rates & Economic Indicators - JP Morgan asset management believes 2025 will see a return to normal for the markets, including global diversification and fixed income performing well [2] - A 4% 10-year Treasury note feels healthy and normal, aligning with nominal growth (real GDP growth plus inflation) [6][7] - Rate volatility is at its lowest levels since the Fed started hiking rates in March 2022, and the Goldman Sachs financial conditions indicator shows easy conditions for the US consumer [5] - JP Morgan asset management anticipates double-digit earnings growth in 2026 [4] Sector Allocation - Wells Fargo Investment Institute cut back to neutral on the technology sector and communication services, which together represent close to 50% of the S&P 500's value [10][11] - Funds have been moved into industrials, utilities, and financials [12] - Diversification into utilities and industrials is partly driven by their AI impact, offering a cheaper way to gain exposure [13][14] - It's important not to diversify too far away from companies with strong growth and cash flow potential [15]