JPMorgan remains bullish on U.S. stocks even as some observers warn that the economy is beginning to pay the price for President Donald Trump’s tariffs.

The investment banking giant forecasts that the S&P 500, Wall Street’s benchmark index, will yield a “high single-digit return over the next 12 months,” driven by three key factors.

One of the main reasons for optimism is that markets don’t care about signs of an economic slowdown. Instead, traders are focused on resilient corporate earnings and the subsequent economic recovery.

Since President Trump fired the first tariff salvo on April 2, economists have downgraded full-year U.S. growth forecasts from 2.3% to 1.5%. Still, the S&P 500 has gained over 28% in the four months. The index has held steady despite recent economic data revealing softness in the labour market and consumption, as well as stickiness in manufacturing and service sector inflation.

While the macro analysts’ warning is concerning and likely playing out in the background, corporate earnings in the U.S. are ignoring the slowdown risks, at least in the short term, making it the second catalyst for JPMorgan’s bullish thesis.

Over 80% of S&P 500 companies have recently reported their Q2 earnings, with 82% surpassing earnings expectations and 79% beating revenue forecasts—the strongest performance since the second quarter of 2021.

The winners and losers

According to JPMorgan, while Wall Street analysts initially projected earnings growth below 5%, the index is now on pace for an impressive 11% growth rate. This robust showing supports the ongoing bullish trend in the stock market.

“The full-year earnings expectations for both this year and next have already started to turn higher,” analysts at JPMorgan’s wealth management said in a market note on Friday, adding that the market is increasingly differentiating between the winners and losers of the Trump trade war.

Additionally, the market is now figuring out and pricing in which companies are getting hit most by U.S. tariffs. So far, it looks like mega corporations will be just fine. This could bolster the case for further positive sentiment in the markets.

JPMorgan analysts explained that consumer-facing and smaller companies with restrained bargaining power against their trading partners and rigid supply chains are facing a stagnant earnings outlook.

This ties to JPMorgan’s last catalyst: Trump’s tariff bark is proving worse than its bite for large firms, which are managing to secure exemptions and even turn the tariff policies, aimed at sparking a manufacturing boom, into a tailwind.

“The latest example is President Donald Trump’s suggestion that imported semiconductors would be taxed at a 100% rate unless the companies commit to relocating production to the United States. Another sign? Apple products are exempted from the latest tariff rates on Indian goods. Indeed, the company also announced an additional $100 billion investment in U.S. manufacturing facilities. The stock gained almost 9% this week. Tariffs are not happening in a vacuum,” analysts explained.

Big firms gain an additional advantage from the One Big Beautiful Act (OBBA), under which firms can claim 100% bonus depreciation for purchases of qualified business property and immediate expense of domestic research and development costs. According to some analysts, the depreciation policy could increase free cash flow for some by over 30%, which could incentivize more investment.

The bank added that its investment strategy remains focused on large-cap equities, particularly in the technology, financials, and utilities sectors, which it believes are best positioned to navigate this new economic environment.

The crypto angle

JPMorgan’s positive outlook for stocks could bode well for cryptocurrencies, as both tend to move in tandem. The digital assets market has plenty going on for itself, with the Trump administration appointing pro-crypto officials to key regulatory positions.

Recently, the U.S. Securities and Exchange Commission (SEC) ruled that liquid staking, under certain conditions, falls outside the purview of Securities Law. The ruling has raised hopes for staking spot ether ETFs winning regulatory approval.

Ether has rallied over 13% to over $4,200, reaching levels last seen in 2021. Prices surged nearly 50% last month, CoinDesk data show.