JPMorgan says improving market breadth is flashing a positive signal for investors despite the selling in AI stocks.
Michael Nagle/Bloomberg via Getty Images
Stocks are in the midst of a tech sell-off, but JPMorgan Private Bank sees a positive sign flashing.
The percentage of stocks in the S&P 500 that have hit a 20-day high rose to more than 50%.
Strategists said they were eyeing “outsized” gains for the market, despite interim volatility.
Amid a brutal week in the tech sector , the S&P 500 is flashing one sign better days are coming: improving market breadth.
The tech sector is still getting pummeled by fears around AI, but JPMorgan Private Bank sees one bullish signal in the benchmark index that suggests the market is soon headed for a rebound. In a recent note, strategists at the bank pointed to increased market breadth , a measure of the number of winning stocks relative to losing stocks in the S&P 500 .
For a long time this year, breadth has been narrow, with just a few big names driving the gains at the index level while the majority of stocks struggled.
That’s changing, though.
The percentage of stocks in the index that have hit a new 20-day high has risen to over 50%. It’s the first time market breadth has risen that high since the second quarter of 2025, around the time the market was making a historic comeback after the tariffs-fueled market crash.
The extent to which market breadth has increased recently has historically been followed by more gains in the market over the next three-month and six-month periods, the bank added. JPMorgan recently lifted its year-end target for the S&P 500 to 8,000, implying 5% upside to the index’s current levels.
“Despite a crowded risk calendar, breadth and historical outperformance sets the US stock market up for outsized returns after the midterm elections,” Kriti Gupta, an executive director and global investment strategist in JPMorgan’s private bank arm, and Nick Roberts, a portfolio manager at the bank, wrote in a note on Friday.
It’s been a rough few weeks for US stock investors, with the S&P 500 and tech-heavy Nasdaq 100 on track to end October in the red amid several rounds of heavy selling in the AI trade. Fears around AI capex have been widespread and run in multiple directions: investors worry that Big Tech firms may be spending too much on artificial intelligence, and, on the other hand, fear that a pullback in spending could trigger a cascade of consequences that will crush suppliers in the data center space.
Deteriorating market breadth was one of the first warnings investors got that not all was well with the AI trade. Several weeks ago, the benchmark indexes were hovering near record highs, but more than 80% of the S&P 500 had slipped into correction territory . The breadth decline was interpreted by strategists as damage building up underneath the market’s surface.
More analysts are eyeing a market as the market moves closer to the midterm elections , which has historically been a clearing event that allows stocks to renew their rally once its over. In the six months after the midterms, the S&P 500 has gained an average of 14% since 1970, according to an analysis from BlackRock.
In the meantime, the tech sell-off continued on Friday as investors balked at Amazon’s and Intel’s latest earnings reports, with both tech giants signaling that capex spending would increase next year despite negative cash flow. The tech-heavy Nasdaq is down around 8% from its October peak. The iShares Semiconductor ETF, meanwhile, has plunged 28% from its 2026 high, while the Roundhill Neocloud ETF is down 43% from its latest peak.
Read the original article on Business Insider
