JPMorgan Says Geopolitics, AI and Inflation Are Reshaping Global Market Regime

Global equity markets remain near record highs, but the framework that underpinned the era of low inflation and deep globalization is undergoing a structural shift, JPMorgan said.

BlockBeats, a digital-asset news outlet, reported on May 11 that Grace Peters, global head of investment strategy at J.P. Morgan Private Bank, sees the current market rally as being driven by forces different from those in the past. She identified geopolitical fragmentation, the spread of artificial intelligence and the resulting long-term inflation pressures as the key variables.

Peters said the nature of corporate capital expenditure is changing. Rather than focusing only on efficiency gains, companies are increasingly directing spending toward energy security, supply-chain reconfiguration and physical safety. Even excluding AI-related investment, overall corporate capital spending is still growing at about 12%, helping support richly valued stock markets through what she described as a resilience-first investment stance.

That structure could also add to inflation, she said. A high-investment model centered on security and stability is inherently geared toward pushing prices higher, and inflation may last longer than markets expect.

Against that backdrop, JPMorgan favors inflation hedges such as short-term bonds and gold. The bank is also increasing exposure to the US market and to industrial and financial sectors. It added that it is paying attention to opportunities in emerging markets including South Korea and China, where semiconductors, power and supply-chain realignment could benefit.

Peters said global markets are shifting from a regime of low inflation and hyper-globalization to one defined by heavy investment and security-first priorities. That structural transition will have a profound impact on asset prices and investment returns over the next several years.