JPMorgan expects equities to continue advancing into the end of the year, but believes the next stage of the rally will be characterised by changing market leadership rather than an indiscriminate rise across stocks.

“In equities, we stay constructive into year-end, expecting a grind higher with rotation rather than a broad melt-up move,” strategist Fabio Bassi wrote.

The recent rebound in semiconductor shares is viewed by the bank as a sign that risk appetite is recovering tactically. JPMorgan also believes the Federal Reserve’s willingness to remain patient should help limit volatility, leaving positioning and dispersion as important drivers of market performance.

Semiconductors offer opportunities after repricing

Quality Growth and hyperscalers remain among JPMorgan’s preferred equity exposures. The bank also sees semiconductors as increasingly attractive following the sector’s recent repricing.

A favourable combination of continued disinflation and a Fed that keeps monetary policy unchanged could allow participation in the equity rally to expand, JPMorgan said.

The bank is also monitoring developments in bond markets after a significant selloff in longer-dated debt led to renewed steepening of developed-market yield curves.

JPMorgan said part of the move reflects supply-driven “crowding out,” with the substantial capital expenditure requirements of hyperscalers competing with sovereign governments for available capital. At the same time, growing confidence that AI spending can ultimately be monetised is improving expectations for real investment returns.

Bond selloff does not point to policy error, JPMorgan says

The increase in longer-term yields is not currently viewed by JPMorgan as a warning that monetary policy has become dangerously restrictive.

“Higher long-end yields and steeper curves may reflect higher demand for capital and investment opportunities more than policy-error fears,” the bank wrote.

JPMorgan’s central scenario assumes term premiums rise only modestly from current levels. Under those conditions, the bank does not expect higher long-term yields to become a trigger for widespread risk aversion.

Fed debate likely to continue beyond Jackson Hole

The US Treasury’s decision to increase buybacks of 10-year and 30-year debt also attracted JPMorgan’s attention. The bank said the larger purchases suggested policymakers were uncomfortable with the recent rise in long-term yields.

JPMorgan does not expect Jackson Hole to resolve the debate over how the Fed will respond to changing economic conditions.

For equities, the bank therefore continues to see a constructive backdrop, with further upside potentially coming through sector and style rotation rather than a broad market melt-up.

The rapid expansion of leveraged and inverse single-stock ETFs in the US is beginning to show signs of strain, as shrinking average fund sizes and a sharp rise in closures raise questions about how many products the market can sustain.

Investor appetite for leveraged exposure has grown alongside a volatile bull market, encouraging issuers to introduce products designed to multiply the daily performance of individual stocks. The trend became particularly visible in June, when such products represented as much as half of all new ETF launches.

The proliferation of funds, however, means more issuers are competing for a limited pool of speculative capital.

“The market for these is saturated and there’s only so much money out there chasing this kind of product,” said Morningstar analyst Daniel Sotiroff. “A few firms at the top end up commanding the lion’s share of the money, and then there’s a long tail of also-rans who are struggling to attract assets.”

Average leveraged ETF assets fall sharply

Industry observers generally view $50 million to $100 million in assets during a fund’s first one or two years as a rough threshold for establishing a sustainable ETF. Products that fail to reach that scale may struggle to generate enough revenue for their sponsors to cover costs.

Some funds have comfortably exceeded that level. The GraniteShares 2x Long NVDA Daily ETF has grown to approximately $3.9 billion, demonstrating the potential demand for leveraged exposure to heavily traded stocks.

Across the broader category, however, assets are substantially smaller.

Morningstar Direct figures show average assets in leveraged ETFs have fallen from $272.2 million at the end of 2024 to $63.3 million currently. Half of the funds have accumulated less than $7 million.

Second wave moves further into speculative stocks

The nature of new launches is also changing as issuers search for additional opportunities.

Vident president Amrita Nandakumar believes the industry is nearing the end of a second expansion wave, with newer offerings increasingly “scraping the bottom of the barrel” by targeting smaller, more speculative and less established stocks.

Despite those concerns, launches have continued at a record pace. Some 244 leveraged ETFs had debuted by mid-August, already exceeding the 229 introduced throughout 2025.

“The first wave we saw a few years ago, and it involved creating leveraged ETFs tied to the names that you’d expect, big, widely watched and volatile companies” such as Nvidia, Tesla and Alphabet, Nandakumar said.

The subsequent wave has expanded well beyond those established companies. New filings include leveraged products targeting smaller stocks, private companies that have yet to file for an IPO and even recently launched AI-themed ETFs.

“You don’t necessarily see these products being listed on the biggest or most stable companies any longer,” said Elisabeth Kashner, director of global funds research at FactSet.

Fund closures signal market consolidation

The expanding range of products has been accompanied by a significant increase in closures. Morningstar said 63 leveraged single-stock funds have shut down in the US so far in 2026, compared with only three last year.

Tradr ETFs has closed products linked to MongoDB and Datadog after both software companies were hit by selling pressure earlier in the year amid concerns about disruption from artificial intelligence.

“We are consistently evaluating our suite of funds to gauge investor demand,” said Matt Markiewicz, head of product and capital markets at Tradr.

GraniteShares also liquidated a 2x leveraged ETF tied to Lucid Group following a roughly 51% one-day collapse in the electric vehicle maker’s shares on July 14. Because a 2x product seeks to multiply the underlying stock’s daily move, a decline of that scale can effectively reduce its net asset value to zero.

“If a fund is below break even or shows no real signs of adoption by the market, we’ll close it,” GraniteShares CEO Will Rhind said, without commenting specifically on the Lucid-linked product.

Corgi Invest continues aggressive expansion

Not every issuer is pulling back. Silicon Valley-based Corgi Invest has launched 127 leveraged or inverse single-stock products this year and intends to expand its range further.

Founder Emily Yuan said the company does not intend to rapidly close funds simply because they are initially small.

Corgi’s products currently hold an average of around $1 million each, but Yuan expects lower fees to help the firm compete for investor assets.

“If you make good products, the money will come,” she said.

Equity market leadership has historically undergone a significant rotation when the Federal Reserve starts raising interest rates, with Value tending to hold up better than Growth and small caps initially coming under pressure, according to Barclays.

The analysis comes as financial markets increasingly price in the possibility of a Fed rate increase by the first FOMC meeting of 2027. That shift has occurred even as expectations for inflation over the near and medium term have eased.

Barclays economists remain more cautious about the prospect of tightening and expect no rate increases during the first half of 2027. Recent inflation readings, they said, should be “sufficiently benign to keep most FOMC members on hold pending further evidence.”

Energy leads before the first Fed hike

To assess the potential market implications, Barclays examined five tightening cycles going back to February 1994 and compared sector and factor performance immediately before and after the first rate increase.

According to the bank, “the onset of a Fed hiking cycle has historically marked a clear inflection point for equity leadership.”

The S&P 500 generated a median return of 2.2% during the three months before the first hike, while small-cap stocks delivered roughly flat performance.

Energy and Industrials stood out during the run-up to higher rates, each recording median gains exceeding 7.5%. Communication Services moved in the opposite direction, falling approximately 2%.

Financials suffer once rates begin rising

The historical picture became less favourable after the first rate increase. The Russell 2000 fell by a median 7.2% during the subsequent quarter, considerably worse than the S&P 500’s median decline of 3.9%.

Financials were the weakest-performing sector, posting a median loss of 8.4%. Health Care, Utilities and Consumer Staples also struggled, despite their traditionally defensive characteristics.

Energy proved the exception, generating a modest median gain of 0.3%.

Barclays said Financials can be hurt by the combination of tighter financial conditions and flattening yield curves, which weigh on lending margins. Defensive sectors have also historically experienced valuation pressure when a rate increase signals confidence from policymakers that the economy can withstand tighter monetary conditions.

Value advantage strongest among small caps

Within style factors, Barclays found that Value has “generally fared better than Growth, especially within small caps.”

Large-cap Growth historically trailed Value over the two quarters following the first rate increase. Among smaller companies, the difference was greater, with the shift “even more pronounced among small caps, where Growth trails Value sharply within the first two months of the hiking cycle.”

Momentum typically performs strongly in advance of the first hike but becomes more range-bound once tightening is underway.

The Fama-French small-over-large factor has also tended to weaken during approximately the first two months of a hiking cycle, before subsequently entering a more sustained recovery.

JPMorgan Chase is adjusting its approach to loans secured against shares in newly public companies as it looks to expand its business with wealthy individuals connected to the technology sector, according to a Financial Times report published Tuesday.

The bank normally requires a company to have been publicly traded for at least 135 days before accepting its stock as collateral for a loan.

That restriction was reportedly relaxed in connection with SpaceX’s June initial public offering. Before the company went public, JPMorgan advised its bankers that lending against shares in Elon Musk’s rocket and AI business could begin sooner than would typically be permitted under the bank’s policy, the FT said.

Bank could extend flexibility to Anthropic

A similar approach could potentially be applied to Anthropic when the Claude developer reaches the public markets, according to JPMorgan bankers cited by the Financial Times.

Such a move would give the bank greater flexibility when serving technology founders, executives and shareholders whose wealth may be heavily concentrated in shares of companies that have only recently completed an IPO.

JPMorgan has not yet made a final decision regarding Anthropic, however, and its eventual lending policy for the company’s shares remains subject to change, according to the report.

Gold traded close to unchanged on Friday as markets awaited Federal Reserve Chair Kevin Warsh’s Jackson Hole address for further indications on the direction of U.S. monetary policy.

Spot gold was little changed at $4,600.19 an ounce at 02:50 ET, or 06:50 GMT. U.S. gold futures were down 0.3% at $4,651.41.

The metal had climbed to a three-month high near $4,700 an ounce earlier in the week as concerns surrounding U.S. fiscal policy and Treasury measures involving longer-dated bonds contributed to demand.

Gold was nevertheless on course for a small weekly decline, which would end a run of three consecutive weekly gains.

Warsh address puts interest-rate outlook in focus

Warsh is scheduled to speak at 10 a.m. ET, or 1400 GMT, on Friday at the Federal Reserve’s Jackson Hole symposium.

The appearance will be his first major Jackson Hole address as Fed chair, with investors monitoring his comments for indications of how policymakers are assessing inflation and interest rates.

Recent economic data have complicated expectations surrounding monetary policy. The personal consumption expenditures price index, which is closely monitored by the Federal Reserve, rose 3.7% in the 12 months through July.

Markets were assigning a 34% probability to an interest-rate increase in September and a 74% probability of an increase by December, according to the CME FedWatch tool.

Those percentages reflect market pricing rather than guidance from the Federal Reserve.

Gold remains sensitive to yields and the dollar

Expectations for U.S. interest rates remain relevant to gold because the precious metal does not provide an interest yield.

Higher rates can increase the relative appeal of interest-bearing assets, while declining yields can reduce the opportunity cost associated with holding gold.

The metal has also recently received support from a weaker U.S. dollar, which can reduce the cost of dollar-denominated gold for buyers using other currencies.

Despite being on track for a modest weekly decline, gold has gained more than 13% during August.

Silver, platinum and copper trade higher

Other metals moved higher during Friday’s session.

Silver increased 1.3% to $70.11 an ounce, while platinum rose 1.8% to $1,882.60 an ounce.

Copper also advanced, with benchmark futures on the London Metal Exchange gaining 0.4% to $14,338.15 a tonne.

U.S. copper futures were 0.2% higher at $6.68 a pound.

Oil prices moved lower on Friday, putting Brent and West Texas Intermediate on course to end two consecutive weeks of gains as markets continued to assess developments involving the United States and Iran.

Brent crude futures fell 60 cents, or 0.67%, to $89.10 per barrel at 0636 GMT. WTI futures declined 64 cents, or 0.77%, to $82.89.

For the week, Brent was heading for a 5.3% decline, while WTI was on track to fall 4.3%.

Strait of Hormuz oil shipments show signs of increasing

Oil markets continued to monitor shipping activity through the Strait of Hormuz alongside diplomatic developments involving Washington and Tehran.

“Despite diplomatic efforts hitting a roadblock, there are growing signs of additional oil flowing through the Strait of Hormuz,” ING analysts said in a note. “As the conflict persists, producers are adapting to the new realities and becoming increasingly comfortable navigating the strait.”

Goldman Sachs estimated on Thursday that total Gulf exports had recently reached between 15 million and 16 million barrels per day.

The estimate remained 7 million to 8 million barrels per day below pre-war levels but represented an increase of between 5 million and 6 million barrels per day from the low reached in March.

Trump administration reportedly rejects return to June agreement

Crude prices had settled higher on Thursday after The Wall Street Journal reported that the Trump administration was not seeking a return to the terms of a June memorandum of understanding with Iran.

Citing people familiar with the matter, the report said the U.S. administration had repeatedly informed mediators that it had no interest in reviving the agreement, creating an additional complication for diplomatic efforts to resume negotiations.

Washington separately said earlier on Thursday that it was not holding talks with Iran, despite attempts by other countries to facilitate renewed discussions.

Washington announces additional sanctions against Tehran

The United States announced further measures against Iran on Monday, describing them as the “toughest sanctions in history”.

Iran responded by describing the sanctions as an “inhumane and hostile act” and saying that they had lost their effectiveness.

Those descriptions represent statements from the respective governments rather than independent assessments of the measures.

Russia warns of possible response involving British military targets

Separate geopolitical developments also remained under consideration after Moscow issued a warning concerning Ukrainian attacks on Russian territory using British-supplied long-range cruise missiles.

Russia said it could respond by striking British military targets both inside and outside Ukraine.

U.S. President Donald Trump, however, said Russian President Vladimir Putin would not attack a member of the North Atlantic Treaty Organization.

Trump also played down media reports that CIA Director John Ratcliffe had warned Russian officials this week against carrying out such an attack.

Britain is a founding member of NATO.