JPMorgan Stock Lags Market Despite Accelerating Earnings Growth
Giverny Capital highlighted JPMorgan Chase as a prime example of the current market disconnect, where solid earnings growth is being overshadowed by momentum-driven tech stocks.
Giverny Capital Asset Management used its second-quarter 2026 investor letter to highlight a growing disconnect in the S&P 500, pointing to JPMorgan Chase as a prime example of strong earnings failing to translate into market-beating stock returns.
The bank closed at $345.23 on July 21, reflecting a $917.69 billion market capitalization. While JPMorgan shares have gained 16.33% over the past 52 weeks and 3.53% in the last month, the stock is trailing the broader market this year. This divergence persists even though the bank has compounded earnings in the low teens over the past decade, with that growth recently accelerating.
The firm noted that this is not an isolated phenomenon among high-quality companies. "We own Index constituents such as Charles Schwab, JPMorgan Chase & Co. (NYSE:JPM), Mastercard and Progressive Corp. that continue to grow their earnings per share at healthy rates and in some cases at higher rates than usual, but whose stock prices are lagging," Giverny wrote.
This performance occurs against a backdrop of extreme market concentration. The S&P 500 returned 15.20% in the second quarter and 10.21% year-to-date. However, 210 stocks actually lost value in the first half of the year. Giverny pointed out that while 40% of the index outperforming and 60% underperforming is historically normal, two-thirds of that lagging group are underperforming by more than 10 percentage points.
"Even this level of dispersion might make sense if most of the earnings growth in the Index was concentrated in the 200 stocks that were up double digits," the firm stated. "This is not the case."
Instead, the market is being driven by momentum and AI optimism. Tech giants are currently benefiting from a wave of investor enthusiasm, though Giverny warned that a reliance on "moonshot" investments raises sustainability concerns and fears of an AI bubble.
For investors, the current environment presents a distinct challenge. Giverny, whose model portfolio returned 13.70% for the quarter, noted that Benjamin Graham described the market as a "voting machine" in the short term and a "weighing machine" in the long term. The firm advises building portfolios that include both emerging tech leaders and established firms capable of compounding earnings to maintain a competitive edge.
