J.P. Morgan’s View of 2026: Economic Divergence, Policy Divergence, and Soaring AI Adoption

JPMorgan predicts that 2026 will be dominated by the AI supercycle, uneven monetary policies, and economic structural divergence, supporting a global stock market uptrend and setting a bullish S&P 500 target of 7,500 points.

Author: Zhang Yaqi

Source: Wallstreetcn

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 policy, a surge in AI adoption, and increasingly pronounced multidimensional market and economic divergence.

According to data from Chasing Trends Trading Desk, despite a complex macro environment, JPMorgan remains positive about the global stock market and sets a year-end 2026 S&P 500 target at 7,500 points. Strategists believe the “AI supercycle” is driving record capital expenditure and profit expansion, making it the most critical investment theme for the next year. If the Fed further eases policy due to improving inflation, the S&P 500 could even break 8,000 in 2026. As of press time, S&P 500 futures were up 0.19 to 6,870 points.

On monetary policy, JPMorgan predicts the Fed will cut rates by 25 basis points in December this year and January next year, then pause, maintaining this “asymmetric bias” through the first half of 2026. This policy path will cause significant divergence among developed market central banks: apart from the Fed and Bank of England expected to cut rates, central banks in the Eurozone, Scandinavia, and Australia are expected to hold steady in 2026. This divergence is expected to put downward pressure on the dollar, but the decline will be limited by the relative strength of the US economy.

JPMorgan’s global market strategy team emphasizes that 2026 will feature “multidimensional polarization”: the stock market will diverge between AI and non-AI sectors, the US economy will split between strong capital expenditure and weak labor demand, while consumer trends will exhibit an unhealthy “K-shaped” pattern.

AI Supercycle and Economic Divergence

JPMorgan not only sees 2026 as a year of surging AI adoption, but also defines it as a critical period for reshaping investment, productivity, and industry leadership. The ongoing expansion of AI is fueling a global capital expenditure boom. The report points out that, although the US faces labor force challenges in some sectors, corporate investment is being strongly driven by AI trends. The bank believes the momentum in the AI industry is spreading both geographically and sectorally, expanding from technology and utilities into banking, healthcare, and logistics.

This tech-driven growth is also exacerbating internal economic structural rifts. JPMorgan describes a “K-shaped economy,” with strong corporate capital expenditure (Capex) but highly divergent household consumption. While the new US administration’s deregulation agenda may unleash new business vitality, the impact of tariff policies may be staggered, and productivity gains from AI plus falling energy prices will partly offset the inflationary impact of tariffs.

On economic growth, JPMorgan expects global GDP growth of 2.5% in 2026, basically flat from 2.7% in 2025. US GDP growth is expected to hold at 2.0%, while the Eurozone slips to 1.3%. The report notes that global growth prospects remain resilient, mainly due to accommodative monetary and fiscal policies and fading concerns about US policy. The bank expects US inflation to remain sticky, with core PCE inflation edging up from 3.0% in 2025 to 3.1% in 2026.

The “synchronization” of monetary policy is a thing of the past. JPMorgan expects the pace of easing in developed markets to be highly uneven. After completing “insurance cuts,” the Fed’s neutral rate is expected to stabilize around 3%. In contrast, the Bank of England is expected to cut rates further in December 2025, and March and June 2026. In the Eurozone and Japan, policy rates will face different pressures, especially as the Bank of Japan remains cautious, but yen rates still have upward pressure.

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

Based on the above macro outlook, JPMorgan has voiced strong views on cross-asset allocation:

Bonds & Rates: The US 10-year Treasury yield is expected to dip before rising, targeting 4.25% by midyear and 4.35% by year-end. Given expectations of a Fed rate cut pause, strategists recommend underweighting the mid-segments (2-year/5-year/10-year) of the US Treasury yield curve.

FX: Maintain a bearish view on the dollar, believing the Fed’s asymmetric policy tilt in the first half of 2026 will curb dollar strength. The bank is bearish on the yen, forecasting USD/JPY to rise to 164 in Q4 2026. In emerging markets, the bank favors high-yield currencies such as the Brazilian real (BRL), Mexican peso (MXN), and South African rand (ZAR).

Commodities: JPMorgan is bearish on oil, expecting supply-demand imbalances to drive prices lower, with 2026 Brent crude averaging only $58 per barrel. In contrast, the bank remains structurally bullish on precious metals, setting a stunning gold target of $5,000/oz for Q4 2026, and is also bullish on silver and copper (mainly driven by AI-related electricity demand) and aluminum.

JPMorgan outlines key scenario assumptions. In the optimistic “upside risk” scenario, the AI theme broadens further or “immaculate disinflation” occurs—productivity gains offset inflation pressures, allowing the Fed to normalize rates. Additionally, US deregulation or global fiscal easing with multiplier effects could drive above-expectation economic growth.

In the bearish “downside risk” scenario, the main threats include a genuine macroeconomic slowdown, market skepticism toward AI triggering tech stock pullbacks, and a sudden shift in Fed policy. Especially if inflation remains sticky and the Fed is forced to abandon its asymmetric bias and turn hawkish, liquidity could tighten, hitting high-beta assets.