The AI rollout is considered to be in its early stages (year 2-3 of a 10+ year cycle), fueling record capital expenditures and earnings growth. The investment theme is expected to broaden from core tech providers to the next tier of companies adopting AI, supporting a preference for US large-cap and growth stocks.
Sticky inflation will remain a global theme, preventing most central banks from significantly cutting rates as markets expect. While inflation in Western Europe is forecast to hit its target, it is expected to remain elevated in the US, keeping the Fed dovish but with limited room for easing.
The global economy is characterized by a split between strong, AI-driven capital expenditures and weak labor market dynamics, partly due to restrictive immigration policies. This divergence is also seen in regional inflation outlooks, with Europe expected to reach its target while the US does not.
Despite macroeconomic risks, J.P. Morgan holds a bullish view on global equities for 2026, forecasting 10-25% upside. This is supported by resilient earnings, potential fiscal stimulus, and a belief that bond yields are unlikely to break out higher.
Keep pulling the thread on J.P. Morgan.