What are the keywords for Wall Street in 2026? The large model has provided the answer.

What are the monitoring indicators for the artificial intelligence investment bubble?

Entering 2026, market sentiment remains relatively stable overall. Despite several rounds of policy fluctuations and bubble panic in 2025, as well as recent geopolitical tensions, the S&P 500, Dow Jones, and Nasdaq indices have all achieved substantial returns over the past year.

On December 13, 2025, Donald Trump made an appearance at the White House. Photo credit: Tom Brenner—Getty Images

However, Wall Street analysts are well aware that the conditions supporting market prosperity are becoming increasingly stringent. For example, despite growing skepticism about returns on artificial intelligence investments, this year’s market optimism is still primarily driven by expectations surrounding artificial intelligence. Any news that shakes confidence could have an outsized impact on the stock market.

So far, the U.S. economy has withstood potential negative impacts from tariffs, immigration policies, inflation, and employment issues. Employers have found a balance: layoffs due to declining corporate confidence and rising costs are offset by a shrinking labor market—some individuals have been forced to leave or have chosen to leave the United States.

How can all of this be summarized in one word? Utilizing the power of artificial intelligence, Fortune magazine input the 2026 outlook reports from 15 top banks on Wall Street into the Perplexity model, asking it to summarize in one word. The model’s output keyword was: “precarious.”

For many human users, Perplexity’s reasoning is not unfamiliar. It indicates that these reports “acknowledge that 2026 will be a year where strong long-term trends coexist with structural fragility. The market is resilient yet fundamentally weak, relying on the maintenance of a few stringent conditions, while risks in multiple areas such as geopolitical issues, monetary policy, and valuations are accumulating.”

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The Paradox of Artificial Intelligence

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For investors, the most challenging and precarious balance in 2026 lies between the opportunities and the frenzy in the field of artificial intelligence.

Kristin Lemkau, CEO of JPMorgan Wealth Management, pointed out in a report titled “Hope and Pressure” that “artificial intelligence will undoubtedly reshape industries and investment opportunities in 2026, but it also comes with risks of excessive frenzy.” JPMorgan noted that annual capital expenditures by tech giants have surged from $150 billion in 2023 and could exceed $500 billion in 2026, with nearly 40% of the S&P 500’s market capitalization directly affected by cognitive or real applications related to artificial intelligence.

For many, the internet bubble remains a cautionary tale. JPMorgan has established five indicators to measure similar irrational exuberance. The first indicator is capacity, with the firm noting that industry capacity is sufficient to meet demand. The second indicator is the availability and abundance of credit; currently, there is ample funding in the artificial intelligence sector, with the report stating, “The public markets are willing to finance large tech companies, whose spreads are below the broad investment-grade index.”

The third indicator is risk concealment, such as masking risks through lenient underwriting or financial standards. The bank stated it is “looking for signs of such behavior” and is cautious about “circular investments” in the artificial intelligence supply chain.

The fourth speculative indicator shows that market heat is still within healthy ranges, but reaching higher levels would trigger warning signs. The final indicator is the gap between valuations and cash flows, with the report emphasizing that during the internet era, companies could go public without revenue, but now “the returns of artificial intelligence companies come entirely from profit growth.”

JPMorgan concluded: “The elements of a market bubble seem to be present, but we believe the risk of a bubble forming in the future is greater than the risk that we might currently be at the peak of a bubble.”

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Macro Frontier: “Precarious”

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Deutsche Bank’s global outlook report states that 2026 will be “anything but mundane.” Economists Jim Reid and Peter Sidorov noted that Europe is mired in internal political division, while the current year-long trade truce between the U.S. and China is set to expire in November, at which point competition between the two may intensify again.

The two added, “Given the fragility of the labor market, the probability of a recession in the U.S. economy has increased.”

In recent months, job growth in the U.S. has been sluggish, but with the labor force shrinking, the unemployment rate remains relatively stable. Earlier this year, David Doyle, Chief Economist at Macquarie Group, told Fortune, “We are in a delicate balance; if layoffs increase even slightly, it could disrupt the balance and push up the unemployment rate. However, if we get through this soft period, the unemployment rate could also fall.”

Goldman Sachs Chief Economist Jan Hatzius holds a similar view. In the outlook report, Hatzius wrote that the main weakness in the U.S. economy is the labor market, whose weakness could trigger a recession. Although Goldman Sachs optimistically believes a recession can be avoided, Hatzius stated that it is “too early to rule out that possibility.”

The dynamics of the labor market are also a key force shaping Federal Reserve policy in recent months. Despite inflation stubbornly remaining above the 2% target, influenced by the labor market situation, the Federal Reserve has still lowered interest rates. In fact, some analysts expect inflation to struggle to approach the target in the coming years.

Bank of America Senior Economist Aditya Bhave and his team forecast that by the end of 2026, the core inflation rate will remain at 2.8%, falling to 2.4% by the end of 2027, with short-term pressures coming from tariffs and one-time price level adjustments due to the Men’s World Cup. If such price increases do occur, even with a more dovish chair at the Federal Reserve, it could halt expectations for a loosening cycle in the coming years.

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Concerns Over Consumer Divergence

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The strong resilience shown by American consumers post-pandemic continues to exceed Wall Street’s expectations. However, since the end of 2025, a so-called K-shaped economic trend has quietly emerged. Earlier this year, Mark Zandi, Chief Economist at Moody’s Analytics, told Fortune that while the affluent are moving forward without concern, about half of Americans are actually in a recession. Zandi pointed out that low-income families “are barely getting by financially.”

Although the prosperous outlook for the U.S. economy still faces multiple contradictions, the overall outlook remains optimistic. For example, Vanguard noted that in 2025, despite headwinds such as rising tariffs and stagnating labor supply, “the economy remains resilient.” 2025 was still a positive year amid adversity, stating, “Despite significant obstacles such as rising tariffs, a sudden halt in labor supply, and slowing growth, economies remained strong.”

Deutsche Bank summarized: “Although our global economists and strategists are generally optimistic about 2026, we expect that market volatility and emotional swings will not easily subside.”

Editor’s Note

· Wall Street points out that the current artificial intelligence investment boom already has bubble elements, and its indicators for monitoring “irrational exuberance” (such as supply chain “circular investments”) provide important risk warning references for Chinese tech companies and investors, reminding investors to remain rational amidst market frenzy.

· The emerging “K-shaped economy” trend in the U.S. indicates a severe divergence in prosperity between high-income groups and about half of low-income individuals, which holds significant implications for China in considering how to balance efficiency and equity and promote common prosperity.

· The macro new normal of “fragile growth”: Wall Street believes that growth in the U.S. financial markets in 2026 depends on a few stringent conditions, and any minor disturbance could amplify shocks. This consensus on global macroeconomic “fragility” will help Chinese investors establish a more prudent global asset allocation strategy.

Wealth Chinese Network has made edits and adjustments to the original text.

Translator: Zhong Huiyan - Wang Fang

Editor: Wei Yutong