Stocks are at record highs while inflation is creeping back up - two facts that shouldn't sit together comfortably. According to JPMorgan's top private bank strategist, they actually do.
Grace Peters runs global investment strategy at JPMorgan Private Bank. On Bloomberg TV Monday morning, she told investors that valuations at these levels still pencil out, because companies are pouring money into themselves at the fastest pace in years.
Earnings season showed a 12% jump in capital spending outside of AI. Capex - money companies spend on long-term assets like factories and equipment - is being driven by national security needs and reshoring as much as by tech.
"We want to be in there for the equity bull market that we still see ahead," Peters told Bloomberg. The catch: she also wants investors to bolt on more protection.
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Peters doesn't think inflation is going back to where it was. JPMorgan's own base case has headline inflation - the broad price index - around 4% by May, easing toward 3% by December and below 2% by 2027.
Even in JPMorgan's most optimistic scenario, the Fed stays on hold deep into 2027.
Why does that matter? Bonds have been the classic hedge against stock drops for decades, the "40" in the 60/40 portfolio.
When stocks fall, bonds usually rise, but that trade-off only works if inflation is low and the Fed has room to cut rates. Strip that out, and bonds and stocks can sell off together - which is two losses at once instead of one position offsetting the other.
Her playbook: real assets, gold, and infrastructure - things you can touch that hold value when paper money loses it.
These aren't tactical trades for a quarter. Peters described them as strategic, the kind of allocation shift you make for a world where inflation is structurally higher than the last cycle.
The Middle East war has accelerated that conversation, along with the AI build-out and the chip race - each one adding pressure to prices that doesn't go away when oil settles back down.
The bigger story isn't whether stocks keep climbing. It's what investors are pairing them with.
If the smartest private bank in the world is quietly telling clients to add gold and infrastructure on top of stocks, the question is whether the rest of the market is doing the same. That's the trade Peters thinks is being underbought.
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