In 2026, style positioning will likely resemble 2025, with new extremes in crowding, record concentration and a “winner-takes-all” dynamic. Looking at the S&P 500, J.P. Morgan Global Research estimates the AI supercycle driving above-trend earnings growth of 13–15% for at least the next two years.
Key takeaways
- J.P. Morgan Global Research is positive on global equities for 2026, forecasting double-digit gains across both developed markets (DM) and emerging markets (EM).
- Looking at the economy, J.P. Morgan Global Research forecasts a 35% probability of a U.S. and global recession in 2026, and sticky inflation will likely remain a prevailing theme.
- Most DM central banks are expected to either stay on hold or conclude their easing cycle in the first half of the year.
- While J.P. Morgan Global Research continues to be bearish on the dollar for 2026, it is moderately bullish on the euro.
“We expect the global economy to remain resilient in 2026, with AI investment continuing to drive market dynamics and support growth.”
Hussein Malik
Head of Global Research, J.P. Morgan
What’s the overall outlook for global markets in 2026?
The year ahead will likely be defined by the collision of uneven monetary policy, the relentless expansion of AI and intensifying market polarization. These drivers, along with the evolving U.S. policy agenda, will continue to reshape the global macro and market landscape.
“At the heart of our outlook is a multidimensional polarization: equity markets split between AI and non-AI sectors, a U.S. economy balancing robust capex with soft labor demand, and a widening divide in household spending,” said Dubravko Lakos-Bujas, head of Global Markets Strategy at J.P. Morgan.
All things considered, J.P. Morgan Global Research sees a resilient global growth outlook for 2026 thanks to factors including front-loaded fiscal policy support. However, downside risks remain elevated, given weak business sentiment and the ongoing slowdown in the labor market. At the same time, the tailwinds of 2025 — such as healthy balance sheets for corporates and households, ample liquidity and the broadening of AI capex spending — will likely persist in 2026, driving earnings expansion.
“Overall, the market environment remains fragile, and investors must navigate a landscape where risk and resilience coexist,” added Fabio Bassi, head of Cross-Asset Strategy at J.P. Morgan.
“At the heart of our outlook is a multidimensional polarization: equity markets split between AI and non-AI sectors, a U.S. economy balancing robust capex with soft labor demand, and a widening divide in household spending.”
Dubravko Lakos-Bujas
Head of Global Markets Strategy, J.P. Morgan
Equity markets
J.P. Morgan Global Research is positive on global equities for 2026, forecasting double-digit gains across both developed markets (DM) and emerging markets (EM). This bullish outlook is buttressed by factors including robust earnings growth, lower rates, declining policy headwinds and the continued rise of AI.
“The AI-driven supercycle is fueling record capex and rapid earnings expansion. This momentum is spreading geographically and across a diverse list of industries, from technology and utilities to banks, healthcare and logistics, creating winners and losers in the process,” Lakos-Bujas observed.
Indeed, AI could further amplify polarization within an already unhealthy K-shaped economy, and market concentration could reach new highs as a result. “In such an environment, broad sentiment measures remain prone to sharp swings, even though underlying trends remain intact and fundamentals solid,” Lakos-Bujas said.
Regional outlooks
Sanaenomics — the economic policies of new Japanese Prime Minister Sanae Takaichi — and corporate reforms will likely propel Japanese equities in 2026. Businesses will likely focus on unlocking excess cash, which could in turn fuel capital investment, wage growth and shareholder returns. In addition, Sanaenomics is expected to revive middle-class spending and strategic investments, providing tailwinds for the market.
EM equities are positioned for robust performance in 2026, boosted by lower local interest rates, higher earnings growth, attractive valuations, ongoing improvements in corporate governance, healthier fiscal balance sheets and resilient global growth. China could see green shoots emerging in the private sector after a multi-year slowdown, while Korea remains supported by governance reforms and AI. Elsewhere, LatAm could experience strong upside thanks to outsized monetary policy stimulus and key political shifts.
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The global economy
The global expansion is at an important juncture. While GDP growth has been resilient through 2025, imbalances have formed as demand has rotated toward tech capex and job gains have stalled.
“Business caution is the primary drag on hiring, reflecting trade war concerns and sluggish non-tech demand. In turn, weak labor demand is starting to erode purchasing power, particularly in the U.S., where softening private sector labor income growth is combining with firming inflation and a concentrated near-term public sector drag,” said Bruce Kasman, chief global economist at J.P. Morgan.
To this end, J.P. Morgan Global Research sees consumption downshifting in DM in the fourth quarter of 2025, with a 35% probability of a U.S. and global recession in 2026. However, global GDP growth is expected to receive a boost in the first half of the year thanks to front-loaded fiscal stimulus, promoting a rebound in sentiment.
“Our baseline forecast sees the health of the business sector, supportive financial conditions and fiscal stimulus as the ingredients that will enable the global economy to absorb the sentiment shock currently depressing labor demand. If we are right, job growth and sentiment will pick up as we move through the first half of 2026, supporting the recoupling of labor demand with solid GDP gains,” Kasman noted. In addition, an AI spending wave could deliver a limited boost to the global economy.
Sticky inflation will likely remain a prevailing theme. After unwinding supply shocks related to the pandemic and the Russia-Ukraine war, inflation has hovered around 3% with little sign of moving lower. “Upward pressure on global goods prices related to the trade war is likely to be transitory, but we expect elevated goods price pressures to remain in place, at least through the first half of 2026,” Kasman added.
Global outlook scenarios
J.P. Morgan Global Research sees a 35% probability of a U.S. and global recession in 2026.
Rates
J.P. Morgan Global Research assumes growth will run at or above potential across most DMs in 2026, and that inflation will continue declining — albeit remaining sticky in several jurisdictions. This could create a further decoupling in monetary policy outcomes: for instance, the Federal Reserve (Fed) is expected to cut rates by another 50 basis points (bp), while the Bank of Japan (BoJ) is expected to hike by the same amount. Elsewhere, most DM central banks will likely either stay on hold or conclude their easing cycle in the first half of the year.
However, risks surrounding this baseline view remain. In the U.S., downside risks from a more persistent cyclical weakening in the labor market contrast with upside risks to growth stemming from AI adoption — both of which could impact the Fed’s reaction function in different ways. And in the U.K., there is potential for further bouts of increased term premia around fiscal events, with political uncertainty also increasing.
Overall, DM yields are forecast to grind higher over the course of 2026. 10-year Treasuries, 10-year Bunds and 10-year gilts could reach 4.35%, 2.75% and 4.75% respectively by the fourth quarter, with mixed curve performance. “We project Treasury yields will remain range-bound over the next few months, before rebounding moderately once the Fed goes on hold in the spring,” said Jay Barry, head of Global Rates Strategy at J.P. Morgan. “Outside of the U.S., we see Bunds and gilts markets maintaining the same ranges they occupied in 2025, and potentially getting pulled cheaper within them as U.S. yields start to trend higher into the middle of the year.”
In Asia, J.P. Morgan Global Research remains bearish on Japanese government bonds (JGBs) and expects broad bear-flattening dynamic. “We do not yet see any clear evidence to suggest a bullish trend reversal looks imminent, especially as other DM markets look set to potentially weaken into the middle of next year,” Barry added.
FX
J.P. Morgan Global Research continues to be bearish on the dollar in the coming year. “Our dollar view for 2026 is net bearish, albeit smaller in magnitude and less uniform in breadth than in 2025,” said Meera Chandan, co-head of Global FX Strategy at J.P. Morgan. “The combination of a Fed that continues to fret about labor market softness and a middle-of-the-smile risk environment that supports the high-yield FX cohort should deliver a lower dollar on the whole, but the runway for weakness is constrained by solid U.S. growth and sticky inflation.”
On the other hand, J.P. Morgan Global Research is moderately bullish on the euro — a view supported by eurozone growth and German fiscal expansion. “However, any EUR/USD gains should be moderate versus 2025 unless U.S. data materially weakens,” Chandan said.
Elsewhere, there could be a buy-the-dip opportunity in sterling given resilient domestic growth, an anticipated global growth upswing and a carry-friendly environment. “The structural drags for GBP are not going away, and this is why we’re taking more of a tactical buy-the-dip approach rather than turning more strategically bullish,” explained James Nelligan, an FX strategist at J.P. Morgan. “In our view, strength in sterling is more likely to come in the first half of the year, with the second half seeing fiscal fears coming back into focus ahead of the next budget, meaning underperformance becomes more of a central risk.”
In Japan, the sharp rise in USD/JPY has come to a halt, but the yen still declined slightly in 2025 — highlighting the challenge for it to sustainably outperform while interest rates remain negative. “In 2026, as the easing cycle among G-10 central banks nears its end, it will become even more difficult to prevent JPY depreciation through policy measures such as rate hikes or intervention,” said Junya Tanase, chief Japan FX strategist at J.P. Morgan. “Plus, if the initial budget for FY26 confirms the Takaichi administration’s expansionary fiscal stance, growing concerns about fiscal sustainability could heighten downward pressure on JPY.”
Forecasts for major currency pairs
By December 2026, EUR/USD is expected to reach 1.20, GBP/USD 1.36 and USD/JPY 164.
Credit
Across global credit markets, focus is shifting from the macro to the micro, and spreads are expected to widen in 2026. “Capex-related issuance across the AI and AI-adjacent ecosystems will take their toll on high-grade spreads, in particular. Plus, M&A and increased leveraged buyout activity will be a factor driving increased issuance across both high-grade and high-yield,” said Stephen Dulake, co-head of Global Fundamental Research at J.P. Morgan.
This dynamic is especially evident in the U.S. high-grade space. “While in recent years we have been more anxious about the macro backdrop disrupting spreads via the channel of lower yields, next year we are forecasting a relatively benign macro environment,” said Nathaniel Rosenbaum, a strategist on the U.S. High-Grade Credit team at J.P. Morgan. “What concerns us more is that high-grade corporates appear to be leaning into this constructive backdrop to increase leverage. With yields 35 bp lower than the starting point for 2025 and 130 bp below the cycle highs, funding costs are no longer as much of an impediment to capex and M&A activity.”
To this end, J.P. Morgan Global Research expects to see moderately wider spreads of 110 bp in U.S. high-grade by year-end 2026. “Even with this widening, high-grade bond spreads will remain quite tight by historical standards. This implies a flat excess return and a total return of 3.0%,” Rosenbaum added.
In Europe, the credit cycle is likely to advance in an environment of cheaper funding rates and reduced policy uncertainty, with some corporates releveraging their balance sheets. Furthermore, global data center construction and European infrastructure spending could require significant amounts of funding from both public and private credit markets.
“Investors in European investment-grade credit markets are suffering from recession fatigue after a string of scares in recent years, making them reluctant to price forward economic risk. Consequently, we are likely to stay in the current tight spread environment until we experience an actual downturn, with our forecast seeing spreads essentially flat at 90 bp,” said Daniel Lamy, head of European Credit Strategy at J.P. Morgan.
For European high-yield, default rates are expected to remain in the 3–4% range for the third consecutive year, but elevated recoveries are limiting credit losses. “We look for the current tight spread regime to continue, with a 2026 forecast of 300 bp, equivalent to a 5.5% total return,” Lamy added.
Emerging markets
Lower macro volatility looks set to support EM local markets in 2026. Overall growth (excluding China) is forecast to maintain a trend-like pace of 3.3%, helped by factors including fading tail-risks on tariffs, easier monetary policy and ongoing tech capex. This resilience largely reflects EM export strength, with limited spillover to domestic demand.
In China, growth should outperform in the first half of the year — especially the first quarter — thanks to the delayed execution of supplementary fiscal measures and the usual front-loading of budget spending. “How much growth slows in the second half will depend on whether — and how quickly — the government introduces additional policy support,” said Tingting Ge, an economist at J.P. Morgan.
EM headline inflation (excluding China and Turkey) is expected to stabilize close to target at 3.2% for 2026. However, while EM core inflation has, on average, returned to central bank targets, there remains considerable variation across economies. “We continue to see further EM rate cuts in the pipeline, but the pace and breadth of cuts are expected to moderate in 2026. EM high-yielders are expected to deliver the bulk of our projected EM easing, with easing space more limited in the low-yielders,” said Jahangir Aziz, head of EM Economics Research at J.P. Morgan.
Risks to this outlook include worryingly high inflation in the U.S., which would cause the Fed to stay on hold. “This is likely to hit EM FX, rates markets and EM credit too, with sell-offs and negative returns resulting,” noted Luis Oganes, head of Global Macro Research at J.P. Morgan. “In addition, a collapse in U.S. equity prices would have knock-on effects for all risk markets, with credit spreads widening. EM would be hit even if the direct impact channels are limited to start with.”
“We continue to see further EM rate cuts in the pipeline, but the pace and breadth of cuts are expected to moderate in 2026.”
Jahangir Aziz
Head of EM Economics Research, J.P. Morgan
Commodities
World oil demand is expanding, with expected growth of 0.9 million barrels per day (mbd) in 2026 and 1.2 mbd in 2027. Yet, supply is forecast to outstrip demand by threefold in 2026, before moderating to roughly one-third of that pace in 2027 — creating a significant surplus, at least on paper.
However, these market imbalances are unlikely to fully materialize in practice, as adjustments are expected on both the supply and demand sides. “We expect the market will find equilibrium through a combination of rising demand — driven by lower prices — and a mix of voluntary and involuntary production cuts. In line with this outlook, we maintain our Brent price forecast of $58 in 2026 and introduce our 2027 forecast of $57, while recognizing that considerable effort will be required to stabilize prices at these levels,” said Natasha Kaneva, head of Global Commodities Strategy at J.P. Morgan.
Elsewhere, rising supply of liquefied natural gas (LNG) looks set to support lower global natural gas prices. “As new supply projects come online, we anticipate longer-term prices will trend downward from current levels. We forecast TTF prices to average 28.75 EUR/MWh in 2026 and 24.75 EUR/MWh in 2027, or 3–4 EUR/MWh below current forward prices,” said Otar Dgebuadze, part of the Global Commodities Research team at J.P. Morgan.
In precious metals, J.P. Morgan Global Research remains bullish on gold on the back of boosted central bank buying and robust investor demand. Gold prices are expected to soar to $5,000/oz by the fourth quarter of 2026, averaging $4,753/oz for the full year. “Silver prices are forecast to rise toward $58/oz by the fourth quarter, averaging $56/oz for the full year, while platinum could continue to trade higher for longer next year before the gears of supply rebalancing gain momentum,” added Gregory Shearer, head of Base and Precious Metals Strategy at J.P. Morgan.
Finally, in agriculture markets, implied volatility has ticked up over recent weeks. “While there are no imminent signs of shortage or supply-side stress — outside of the livestock sector and, to a degree, cocoa markets — over the coming seasons, our projections of world agriculture stocks-to-use ratios remain close to multi-year lows for 2026/27 and 2027/28. This declining availability base, driven by low producer margins, raises sensitivity and price volatility to supply-side disruptions,” said Tracey Allen, an agricultural commodities strategist at J.P. Morgan.
Global commodity price forecasts
In 2026, Brent crude is expected to average $58/bbl, natural gas 28.75 EUR/MWh, gold $4,753/oz, silver $56/oz and wheat $5.65/bu.
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