Dip or opportunity? Major banks are betting on S&P 500 growth

The story with recommendations from JPMorgan Chase and Morgan Stanley now looks like a classic example of how Wall Street is trying to “catch the moment” when the market is scared, but the fundamentals are not broken yet.

Amid geopolitical tensions and oil price spikes, the market dropped noticeably in March but did not move into a full textbook correction. The S&P 500 index at one point lost up to 8% from its highs, balancing on the edge of the so-called “red zone” at −10%, which investors usually perceive as a signal of more serious problems. However, instead of continuing to fall, the market began to gradually recover and has already rebounded by about 8% from its local bottom.

This is where the key logic behind the recommendations of major banks appears. They view what is happening not as the beginning of a crisis, but as a stress test that the market is currently passing quite confidently.

The main argument is corporate earnings. Despite the entire news backdrop, from the Middle East conflict to the risks of an oil price spike, earnings expectations for companies have not only not deteriorated but have even slightly increased. According to the latest estimates, earnings of S&P 500 companies in the first quarter of 2026 may grow by about 13.9% year-over-year. Before the escalation, expectations were lower — around 12.7%.

This is an important point that the market is literally “digesting” right now. If earnings are growing, it means the fundamentals remain intact. And if the fundamentals are not collapsing, then declines driven by fear start to be perceived as temporary.

That is why JPMorgan Chase “strongly advises” that any dips driven by geopolitics are highly likely to be temporary and ultimately turn into entry points for long-term investors. This is almost the classic “buy the dip” formula, adjusted for modern reality, where political events rather than macroeconomic crises act as triggers.

Morgan Stanley sees the situation in a similar way but focuses on market structure. In their view, the recent decline looks more like a technical correction than the beginning of a prolonged bear cycle. The market is supported by two factors at once: steady earnings growth and healthier valuations after the decline.

It is also worth noting how the valuation of the largest tech companies — the so-called “Magnificent Seven” — has changed. Not long ago, they were trading at a significant premium to the market, but now that gap has narrowed considerably. The forward P/E ratio has declined from about 1.7x to 1.2x. Simply put, “expensive stocks” have become slightly less expensive, which reduces pressure on the overall index.

Against this backdrop, banks are beginning to cautiously restore interest in cyclical sectors — financials, industrials, and consumer segments. This is also an important signal. When the market starts looking beyond technology to the broader economy, it usually indicates confidence in the sustainability of growth.

Interestingly, caution still remains at the same time. Goldman Sachs, for example, previously warned about short-term correction risks but did not see conditions for a full bear market. In other words, the overall Wall Street consensus now sounds quite pragmatic: yes, there is turbulence, but no systemic breakdown is visible yet.

At the same time, geopolitics has not disappeared. The market has already reacted once to the risk of the Strait of Hormuz being blocked and a potential oil price spike — and that was quite painful. But the subsequent recovery showed that investors adapt quickly to such shocks if they do not become long-term.

And this is where the main tension of the current situation lies. The entire “buy the dip” strategy works only under one condition — if the negative factors do not become systemic. As long as the market believes the escalation is temporary, the logic of buying dips remains valid. But if the conflict drags on or leads to sustained inflation, the picture could change quickly.

In a broader sense, an interesting shift in risk perception is taking place. Previously, interest rates and inflation were the main factors for the market. Now geopolitics has been added, capable of instantly changing investor sentiment. But the fundamental filter remains the same — corporate earnings.

In the end, the picture looks quite straightforward: the market is scared, but not broken. Money is not leaving the market; it is simply waiting for clearer entry points. And it is precisely in such moments that large players begin to gradually build positions while retail investors are still hesitant.

In simple terms, Wall Street is doing what it has always done: buying when it is scary, but not catastrophic. And the only question is whether this fear will turn out to be temporary noise… or the beginning of something more serious.