SMid Strategy: Perspective that boosts alpha

J.P. Morgan's SMid Strategy team notes that 2026 has been a tough year for portfolio managers: about 60% of SMid PMs have underperformed their benchmark over the past 12 months, and more than 80% in Europe and the UK. Unpredictable events, from the start of war to peace proposals and failed peace efforts, drove large swings in equity markets. The team had told investors that 2026 was a year to sell in May and go away, and sees the 2027 outlook as uncertain: it can be good or bad, but not great. Headwinds include decelerating growth, with margins and earnings likely tougher in the second half as costs catch up with inflation; rallying commodities and oil near $100 per barrel; rising interest rates; El Nino expected to weigh on growth and lift inflation through at least 2Q27; sell-side consensus still assuming best-case scenarios, leaving sentiment with only downside; a lack of market leadership; a squeezed consumer as wage growth lags the cost of living; and rising 30-year bond yields a