JPMorgan is telling clients to keep favouring domestically-exposed stocks in Europe and Japan, saying this is the best way to navigate the next phase of tariff uncertainty.

The U.S. bank notes this strategy has already paid off, with domestics outperforming exporters by 5-20% so far this year in the euro zone, the UK and Japan.

JPM believes many companies initially absorbed tariff costs, betting the levies would be temporary. However, as it becomes clearer tariffs are “here to stay,” these firms will likely change tack and start passing the costs on to consumers.

“One way or another, the tariffs impact is yet to be realized, whether in higher prices, in lower sales, or in weaker corporate profits,” writes JPM strategist Mislav Matejka.

“Our call remains to stay bullish on domestic vs exporters stocks within international markets… For the U.S., the opposite positioning should keep performing well”
Source: Reuters (Danilo Masoni)