JPMorgan's 2026 Outlook: Economic Divergence, Policy Divergence, and a Surge in AI Adoption

Author: Zhang Yaqi

Source: Wall Street Insights

According to JPMorgan's annual outlook report released on the 5th, global markets in 2026 will be profoundly reshaped by three core forces: uneven monetary policies, a surge in AI adoption rates, and increasing multidimensional divergence in markets and economies.

According to Fengwind Trading Desk, despite a complex macro environment, JPMorgan maintains a positive stance on global equities and has set a year-end 2026 target of 7,500 for the S&P 500 index. Strategists believe the "AI supercycle" is driving record capital spending and earnings expansion, which will be the most critical investment theme next year. If the Fed further eases policy due to improving inflation, the S&P 500 could even surpass 8,000 points in 2026. At time of writing, S&P 500 futures rose 0.19 to 6,870 points.

On monetary policy, JPMorgan expects the Fed to cut rates by 25 basis points each in December this year and January next year, then pause, maintaining this "asymmetric bias" through the first half of 2026. This policy path will lead to sharp divergence among developed-market central banks: while the Fed and the Bank of England are expected to ease, central banks in the eurozone, Scandinavia, and Australia are expected to remain on hold in 2026. This divergence is expected to pressure the dollar lower, though dollar losses will be limited by the relative strength of the U.S. economy.

JPMorgan's global market strategy team emphasizes that 2026 will be characterized by "multidimensional polarization": equity markets splitting between AI and non-AI sectors, the U.S. economy diverging between strong capital expenditure and weak labor demand, and consumption showing an unhealthy "K-shaped" trend.

AI Supercycle and Economic Divergence

JPMorgan sees 2026 not only as a year of surging AI adoption but also as a pivotal period for reshaping investment, productivity, and industry leadership. The ongoing expansion of AI is fueling a global boom in capital expenditure. The report notes that although the U.S. faces labor challenges in certain areas, corporate investment is being strongly driven by AI trends. The bank believes AI momentum is broadening geographically and across industries, expanding from tech and utilities into banking, healthcare, and logistics.

This technology-driven growth is also intensifying structural rifts within the economy. JPMorgan describes a "K-shaped economy," where corporate capital expenditure (Capex) remains strong while household consumption is sharply divided. While the new U.S. administration’s deregulation agenda may unleash fresh business vitality, the impact of tariff policies may be staggered, and productivity gains from AI and falling energy prices will partially offset inflationary pressures from tariffs.

On economic growth, JPMorgan forecasts global GDP growth of 2.5% in 2026, roughly flat with 2.7% in 2025. U.S. GDP growth is expected to remain at 2.0%, while the eurozone slows to 1.3%. The report notes that global growth prospects remain resilient, supported by accommodative monetary and fiscal policies and reduced market concerns over U.S. policy. The bank expects U.S. inflation to remain sticky, with core PCE inflation rising slightly from 3.0% in 2025 to 3.1% in 2026.

The era of "synchronized" monetary policy is over. JPMorgan expects highly uneven easing across developed markets. After completing its "insurance cuts," the Fed’s neutral rate is expected to stabilize around 3%. In contrast, the Bank of England is expected to deliver further cuts in December 2025, March 2026, and June 2026. In the eurozone and Japan, policy rates will face different pressures—particularly in Japan, where despite a cautious stance, there remains upward pressure on yen interest rates.

Cross-Asset Strategy: Bearish Oil, Extremely Bullish Gold

Based on these macro views, JPMorgan presents clear cross-asset positioning:

• Bonds and Rates: U.S. 10-year Treasury yields are expected to decline initially before rising later, with a mid-year target of 4.25% and a year-end level of 4.35%. Given expectations for the Fed pausing rate cuts, strategists recommend underweighting the middle of the U.S. yield curve (2-year/5-year/10-year).

• FX: Maintain a bearish dollar view, as the Fed’s asymmetric policy bias in the first half of 2026 will constrain dollar strength. The bank is bearish on the yen, expecting USD/JPY to rise to 164 by Q4 2026. Among emerging markets, it favors high-yielding currencies such as the Brazilian real (BRL), Mexican peso (MXN), and South African rand (ZAR).

• Commodities: JPMorgan is bearish on oil, expecting imbalanced supply and demand to drive prices lower, forecasting an average Brent crude price of just $58 per barrel in 2026. Conversely, the bank maintains a structurally bullish view on precious metals, setting a staggering $5,000 per ounce target for gold in Q4 2026, while also favoring silver, copper (driven by AI-related power demand), and aluminum.

JPMorgan outlines key scenario assumptions. In the optimistic "upside risk" scenario, the AI theme broadens further or an "immaculate disinflation" occurs—where productivity gains offset inflationary pressures, allowing the Fed to complete rate normalization. Additionally, if the U.S. government deregulates or global fiscal easing generates multiplier effects, economic growth could exceed expectations.

In the negative "downside risk" scenario, main threats include a genuine macro slowdown, market skepticism toward AI triggering a tech stock correction, and a sudden shift in Fed policy. Particularly if sticky inflation persists and the Fed is forced to abandon its asymmetric bias and turn hawkish, liquidity could tighten, hurting high-beta assets.