In a significant shift that has caught the attention of market watchers, J.P. Morgan has reversed its long-held bearish stance on the mining and metals sector. In a research note published Monday, the influential investment bank upgraded the sector from “underweight” to “overweight,” citing improving fundamentals and projecting a substantial rebound in commodity prices that could reshape investment opportunities in the space.
A Dramatic Reversal After Prolonged Underperformance
This dramatic change in outlook comes after mining equities have significantly underperformed both broader market indices and the very commodities they produce. Since January 2023, the mining and metals sector has lagged behind the MSCI Europe Index by approximately 50% when measured in U.S. dollar terms, according to J.P. Morgan’s analysis. Even more telling is the roughly 20% performance gap that has opened up between mining stocks and industrial metal prices since the beginning of 2024.
This disconnect between commodity prices and mining equities represents an unusual market dynamic that J.P. Morgan strategists believe is poised for correction. “Investors are increasingly aware in Q1’25 that M&M equities are lagging underlying commodity prices, which is unusual,” the strategists noted in their report. This observation underscores a key aspect of their investment thesis—that the sector’s current valuation doesn’t accurately reflect the fundamental strength of commodity markets.
The China Factor: Stimulus Measures Gaining Traction
A cornerstone of J.P. Morgan’s bullish outlook is the expanding economic stimulus program in China, the world’s largest consumer of industrial metals. The bank’s strategists highlighted that “China pivoted to a looser economic policy in Sept’24 and announced new fiscal stimulus actions in Mar’25.” These policy adjustments are particularly significant for metal markets given China’s outsized influence on global demand.
The timing of these stimulus measures coincides with what J.P. Morgan sees as an approaching inflection point for the sector. The bank’s analysis points to a potential “V-shaped” recovery beginning in late Q1 2025, suggesting that the current underperformance of mining equities could rapidly reverse as China’s economic policy support filters through to commodity markets and eventually to corporate earnings.
Copper: The Star Commodity in J.P. Morgan’s Outlook
While the upgrade encompasses the broader mining and metals sector, copper stands out as a particular focus in J.P. Morgan’s analysis. The bank’s commodities research team has issued an ambitious price forecast, projecting a 15% increase in copper prices to $11,500 per metric ton by Q2 2026.
This bullish outlook on copper is supported by multiple factors. First, inventories have been running at historically low levels across major metal exchanges. Second, the supply-demand balance has been tightening, with new mine development failing to keep pace with growing demand. Finally, copper’s essential role in the global energy transition—from electric vehicles to renewable energy infrastructure—provides structural support for long-term price appreciation.
The projected increase in copper prices has significant implications for mining company valuations. Many of the largest diversified miners derive substantial portions of their earnings from copper production, meaning that even modest price increases can translate into meaningful earnings growth.
Beyond Price Dynamics: EBITDA Upgrades on the Horizon
J.P. Morgan’s analysis extends beyond simple commodity price forecasts to examine the potential impact on corporate earnings. The bank projects a 10-20% upgrade in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) estimates for mining companies at current market prices.
Gold producers are expected to be particular beneficiaries of this earnings renaissance, with companies like Fresnillo, AngloGold, and Hochschild projected to post the largest EBITDA gains among the miners covered in J.P. Morgan’s research. This forecast reflects not only strong gold price performance but also operational improvements and cost control measures implemented by these companies.
The potential for substantial earnings upgrades creates a compelling investment case. Mining companies have generally maintained conservative capital allocation policies in recent years, with many prioritizing debt reduction and shareholder returns over aggressive expansion. This financial discipline means that earnings growth could translate more directly into dividends and share buybacks rather than being absorbed by capital expenditure programs.
The Capital Allocation Conundrum
One of the more intriguing aspects of J.P. Morgan’s analysis is their explanation for the sector’s recent underperformance. Rather than pointing to fundamental weaknesses, the strategists attribute much of the lag to capital remaining on the sidelines amid policy uncertainty and historically low investor positioning in mining stocks.
In other words, the problem hasn’t been deteriorating business conditions but rather a lack of investor interest and capital allocation to the sector. This investor apathy has created what J.P. Morgan sees as a strong upside opportunity should sentiment shift more positively—precisely the scenario they now anticipate.
The fact that institutional investors are currently underweight mining stocks compared to historical averages means that even a modest reallocation of capital toward the sector could drive significant share price appreciation. This potential for rapid multiple expansion forms an important component of J.P. Morgan’s bullish thesis.
Stock Picks: Where to Focus Exposure
J.P. Morgan has identified specific companies they believe are best positioned to benefit from the sector’s anticipated re-rating. Their key stock recommendations within Europe include Rio Tinto, Antofagasta, Norsk Hydro, Fresnillo, and SSAB.
These selections reflect a preference for miners with strong exposure to copper, aluminum, and gold, as well as those viewed as strategically vulnerable. The inclusion of companies considered “strategically vulnerable” is particularly noteworthy, suggesting that J.P. Morgan sees potential for merger and acquisition activity as larger players seek to secure access to key commodities amid tightening supply conditions.
“We specifically recommend adding exposure to Miners with exposure to copper, aluminium, gold, and/or corporates that are strategically vulnerable,” the note stated, providing clear guidance for investors looking to position themselves ahead of the projected sector recovery.
Trade Policy: A Lingering Uncertainty
Despite their overall bullish outlook, J.P. Morgan’s strategists acknowledge some remaining headwinds, particularly around trade policy uncertainty. The potential implementation of new U.S. import tariffs on steel, aluminum, and copper represents a risk factor that could impact market sentiment in the near term.
However, the bank’s analysis suggests that this uncertainty may soon be resolved. They expect clarity on these policies by early April, which could itself serve as a catalyst for renewed investor interest in the sector. Once the parameters of any new trade measures are established, companies and investors can adjust their strategies accordingly, potentially removing a key source of market hesitation.
Investment Implications: Positioning for the Rebound
For investors considering how to respond to J.P. Morgan’s upgraded outlook, several implications emerge. First, the current disconnect between mining equities and commodity prices presents a potential entry point ahead of the anticipated V-shaped recovery. Second, companies with exposure to copper appear particularly well-positioned given the bank’s strong price forecast for this metal.
The projected 10-20% upgrade in EBITDA estimates suggests that current consensus earnings forecasts may be too conservative, creating potential for positive surprises as companies report results through 2025 and into 2026. Companies with high operational leverage to metal prices—those whose profit margins expand significantly as commodity prices rise—stand to benefit most from this dynamic.
Conclusion: A Sector at an Inflection Point
J.P. Morgan’s decision to upgrade the mining and metals sector from underweight to overweight represents a significant shift in their outlook after a prolonged period of cautious positioning. Their analysis points to a sector standing at an inflection point, with multiple catalysts potentially converging to drive a reversal in relative performance.
The combination of expanding Chinese stimulus, tightening commodity fundamentals, potential earnings upgrades, and historically low investor positioning creates what J.P. Morgan sees as a compelling risk-reward proposition. While uncertainties remain, particularly around trade policy, the bank’s strategists believe that the potential upside outweighs the risks at current valuation levels.
For investors who have maintained underweight positions in mining and metals stocks during their period of underperformance, J.P. Morgan’s upgraded outlook suggests that now may be the time to reconsider that allocation. With commodity prices already showing strength and mining equities yet to fully reflect this reality, the disconnect identified by J.P. Morgan’s strategists may not persist for much longer.
