JP Morgan's View on 2026: Economic Divergence, Policy Divergence, and Soaring AI Adoption Rates

According to the annual outlook report released by JP Morgan on the 5th, the global market will be profoundly reshaped by three core forces by 2026: unequal monetary policies, a surge in artificial intelligence adoption, and an increasingly severe multidimensional differentiation in markets and economies.

According to the news from the Chasing Wind Trading Desk, despite the complex macro environment, JP Morgan remains optimistic about the global stock market and has set a target price of 7,500 points for the S&P 500 index by the end of 2026. Strategists believe that the "AI supercycle" is driving record capital expenditures and profit expansion, which will be the most critical investment theme in the coming year. If the Federal Reserve further relaxes policies due to improving inflation, the S&P 500 index is even expected to break through 8,000 points in 2026. As of the time of writing, S&P 500 futures rose 0.19 to 6,870 points.

In terms of monetary policy, JP Morgan predicts that the Federal Reserve will cut interest rates by 25 basis points in December this year and January next year, then pause actions and maintain this "asymmetric bias" in the first half of 2026. This policy path will lead to significant differentiation among developed market central banks: apart from the Federal Reserve and the Bank of England, which are expected to cut rates, central banks in the Eurozone, Scandinavia, and Australia are expected to remain unchanged in 2026. This differentiation is expected to exert downward pressure on the dollar, but the decline of the dollar will be limited by the relative strength of the U.S. economy.

JP Morgan's global market strategy team emphasizes that 2026 will be characterized by "multidimensional polarization": the stock market will differentiate between AI and non-AI sectors, the U.S. economy will differentiate between strong capital expenditures and weak labor demand, and consumer spending will show an unhealthy "K-shaped" trend.

AI Supercycle and Economic Differentiation

JP Morgan views 2026 not only as a year of surging AI adoption rates but also as a critical period for reshaping investment, productivity, and industry leadership. The ongoing expansion of AI is driving a global capital expenditure boom. The report points out that although the U.S. faces labor challenges in some areas, corporate investment is being strongly driven by AI trends. The bank believes that the momentum of the AI industry is spreading across geographical and industrial breadth, extending from technology and utilities to banking, healthcare, and logistics.

This technology-driven growth has also exacerbated the internal fractures of the economic structure. JP Morgan describes a "K-shaped economy," where corporate capital expenditures (Capex) are strong, while household consumption expenditures are severely differentiated. Although the new government's deregulation agenda may unleash new business vitality, the impact of tariff policies may be offset, while productivity improvements brought by AI and declining energy prices will partially offset the inflationary effects of tariffs.

In terms of economic growth, JP Morgan expects the global GDP growth rate to be 2.5% in 2026, roughly in line with 2.7% in 2025. Among them, the U.S. GDP growth rate is expected to remain at 2.0%, while the Eurozone is expected to drop to 1.3%. The report points out that the global growth outlook remains resilient, mainly due to loose monetary and fiscal policies, as well as a reduction in market concerns about U.S. policies The bank expects U.S. inflation to remain sticky, with the core PCE inflation rate rising slightly from 3.0% in 2025 to 3.1% in 2026.

The "synchronization" of monetary policy has become a thing of the past. JP Morgan expects the pace of easing in developed markets to be extremely uneven. The Federal Reserve is expected to stabilize the neutral interest rate around 3% after completing its "insurance rate cuts." In contrast, the Bank of England is expected to further cut rates in December 2025, March 2026, and June 2026. In the Eurozone and Japan, policy rates are expected to face different pressures, particularly as the Bank of Japan remains cautious, yet upward pressure on yen rates persists.

Cross-Asset Strategy: Bearish on Oil, Extremely Bullish on Gold

Based on the above macro judgments, JP Morgan has put forward distinct views on cross-asset allocation:

• Bonds and Rates: It is expected that the yield on U.S. 10-year Treasury bonds will experience a dip followed by a rise, with a mid-year target of 4.25% and an end-of-year rise to 4.35%. Given the expectation of the Federal Reserve pausing rate cuts, strategists recommend underweighting the middle of the U.S. Treasury yield curve (2-year/5-year/10-year).

• Forex: Maintaining a bearish view on the dollar, believing that the Federal Reserve's asymmetric policy bias in the first half of 2026 will suppress dollar strength. The bank is bearish on the yen, expecting the USD/JPY to rise to 164 in the fourth quarter of 2026. In emerging markets, the bank is optimistic about high-yield currencies such as the Brazilian Real (BRL), Mexican Peso (MXN), and South African Rand (ZAR).

• Commodities: JP Morgan is bearish on oil, believing that supply-demand imbalances will lead to a decline in oil prices, with an expected average price of Brent crude oil at only $58 per barrel in 2026. In contrast, the bank maintains a structurally bullish outlook on precious metals, setting an astonishing target price of $5,000 per ounce for gold in the fourth quarter of 2026, while also being optimistic about silver, copper (mainly driven by AI power demand), and aluminum.

JP Morgan has outlined key scenario assumptions. In the optimistic "upside risk" scenario, the AI theme further broadens, or there is "immaculate disinflation," where productivity gains offset inflationary pressures, allowing the Federal Reserve to complete interest rate normalization. Additionally, if the U.S. government relaxes regulations or global fiscal easing brings multiplier effects, it could drive economic growth beyond expectations.

In the negative "downside risk" scenario, the main threats include a genuine macroeconomic slowdown, skepticism about AI leading to a correction in tech stocks, and a sudden shift in Federal Reserve policy. Particularly in the case of persistent inflation stickiness, if the Federal Reserve is forced to abandon its asymmetric bias and shift to tightening, it could lead to liquidity tightening, thereby impacting high beta assets