Trump Put Gets Louder, But Bulls Still Need A Map – JPMorgan Strategists See 'Pain Trade' To The Upside

The detox phase may be over but don’t expect investors to binge just yet. JPMorgan’s equity strategy team, led by Dubravko Lakos-Bujas and Bhupinder Singh, thinks the worst of tariff trauma might be easing – though the business cycle hangover still lingers.

In a market update that channels equal parts caution and calculated optimism, the duo points to a subtle but significant pivot in policy tone. “The latest messaging from the Trump Administration seems to be shifting from tariffs to tax cuts and deregulation,” they write a shift that may reduce the left tail risk that’s had investors hiding in cash and hugging their low-leverage books.

But don’t confuse hope with resolution. “Clarity and closure are still needed,” JPMorgan warns, especially as trade chatter with China heats up again. Deals with Japan, Korea and India could serve as templates, but the big dragon in the room – China – remains the key.

President Donald Trump‘s tariffs may come down, but will a complete rollback follow? Unlikely. Transshipment tricks and political posturing will keep some barriers in place.

Bearish Bias And Pain Trade

“Sentiment is very bearish,” the strategists say, with many in the macro community brushing off positive trade signals thanks to “Trump exhaustion.” Systematic portfolios have scaled back so aggressively that some are flirting with max short levels. Translation: the pain trade is up.

JPMorgan sees the S&P 500 likely staying range-bound between 5,200 (base case) and 5,800 (bull case), driven by EPS estimates of $250 and $260, respectively, for 2025. But in the near term, the bias is upward as markets “preposition on tariff de-escalation.”

For investors, that means playing defense might soon come at the cost of missing out. ETFs like the SPDR S&P 500 ETF Trust (ARCA: SPY) and the Invesco QQQ Trust QQQ could benefit if this pain trade reversal plays out.

Meanwhile, iShares MSCI USA Min Vol Factor TF USMV remains a favorite among those still clinging to Low Volatility strategies – just look at the “sharp rise in Low Vol crowding,” the report notes.

Read Also: VIX Is Still Wild, But Not for Long: 3 Volatility ETFs To Grab Before Calm Returns

Momentum Out, Buybacks In

Even with volatility, JPMorgan expects a corporate silver lining. “US corporates to deliver record buyback executions,” thanks to recent equity swings. That should provide some cushion – especially as the dollar dips, energy prices fall and easier monetary policy lurks.

Still, don’t count on a multiple re-rating to the euphoric 22-24x highs. JPMorgan thinks a “~20x upper bound multiple is more reasonable,” citing high-quality fundamentals, AI-driven capex cycles, and capital returns.

ETF Plays For A Murky Macro

As market clarity remains elusive, the strategists highlight the subtle Trump Put – volatility may be self-inflicted, but now there’s an incentive to walk it back. That leaves opportunities for investors willing to hold their noses and look past the noise.

For those leaning into the upside risk:

• SPY and QQQ for broad market exposure,
• USMV for safety-first plays,
• Vanguard Dividend Appreciation ETF VIG as buybacks and cash returns heat up,
• iShares MSCI China ETF MCHI for any surprise breakthroughs with Beijing.

The detox might be over, but the bull case is still waiting for its adrenaline shot. For now, investors may want to brace for a “range-bound” grind – with the pain trade whispering from the upside.

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