JPMorgan strategists said Monday they “remain concerned about the repeat of last summer’s drawdown” as risks of inflation staying hot and bond yields moving above 5% remain.

Within that, the Wall Street giant made regional adjustments in the first quarter, ending its long-held bearish stance on China following a more than 30% drop over the past year. In addition, JPMorgan also upgraded Eurozone equities in the quarter.

“To be clear, we don’t expect Eurozone to directionally decouple from the US, but it is interesting that in the recent bout of market weakness, S&P500 was down 5-6%, in contrast to EuroStoxx50 down only 3%,” the strategists wrote.

They note the Eurozone's attractive valuation at 13x forward P/E compared to the 's 20x, highlighting the improving shareholder returns in the region, with buyback yields approaching U.S. levels and dividend yields double those in the U.S.

Moreover, the ECB is likely to cut rates ahead of the Fed, the strategists stressed, potentially by a greater magnitude.

Meanwhile, improved PMI momentum in the Eurozone compared to the U.S. and tactically stronger performance in China could further enhance the Eurozone’s position relative to the U.S., the U.K., and commodities markets.

Lastly, the strategists said they maintain a preference for Growth over Value, and large-cap stocks over small-caps, “but do recognize the potential for reversal is very high,” they added.

“Now, the risk of extreme concentration and the momentum unwind is also present in Europe, but it is on a much bigger scale in the US,” they continued.