In 2026, the U.S. economy is expected to continue showing resilience after the policy volatility of 2025, providing support for risk assets such as stocks and corporate credit. However, cyclical momentum remains limited, with middle- and lower-income groups facing pressure, and interest rate-sensitive industries like the real estate market still showing weakness. The Federal Reserve will continue to normalize interest rates with gradual steps, and interest rate fluctuations may occur from time to time, requiring investors to manage duration flexibly. Fixed income investments should focus more on the returns of stable assets, while in the stock market, structural themes still outperform cyclical opportunities. Artificial intelligence investment and application will continue to drive U.S. and international economic growth and profit growth. The structural momentum of overseas markets, a weaker U.S. dollar, and low expectations collectively support the performance of international stock markets. Faced with high starting point risk assets, investors need to deeply explore diversified opportunities, balancing returns and risks.

This article provides an overview of JPMorgan's 2026 investment outlook report, exploring global market opportunities and potential risks.

The U.S. Economy Shows a Clear 'K-Shaped' Expansion

This year, the significant increase in tariff rates in the U.S. brought considerable fiscal revenue, but most of the cost was still borne by retailers. It is expected that by the fourth quarter of 2026, it will gradually be passed on to consumers, pushing up inflation and suppressing consumption in the short term, with the impact gradually weakening thereafter. At the same time, tightening immigration policies have led to a decline in the working-age population. Even though the labor force participation rate has risen, employment growth remains relatively slow, forming a certain drag on GDP growth in 2026 and beyond.

Although high tariffs and low immigration suppress economic growth, the continued rise of the stock market brings wealth effects, the artificial intelligence investment boom, and fiscal stimulus policies are also providing support for the economy.

Under this situation, the U.S. economy will present a mix of cold and hot, with a clear 'K-shaped' expansion next year: high-income groups and the technology industry benefit significantly, while tight labor supply and consumption pressure still constrain overall growth.

Three Major Focus Points and Investment Strategies for U.S. Stocks

JPMorgan points out that the U.S. stock market is expected to achieve a third consecutive year of double-digit growth, which is the third time since the global financial crisis. Looking ahead to 2026, investors will face three core questions: Are stocks too expensive? Can profits remain strong? Is there a bubble in the AI sector? In this situation, selectivity and balanced allocation are crucial for investment portfolios:

• Among growth stocks, the technology sector is the most attractive due to its outstanding profitability; consumer stocks are affected by tariffs and consumption fatigue, lagging in performance this year.

• AI beneficiaries should extend from innovators (technology) to enablers (industry, public utilities) and adopters (finance, healthcare).

• Traditional value sectors such as energy and consumer staples may be dragged down by low oil price confusion and low-end consumption fatigue; the financial sector has stable profits and benefits from factors such as relaxed regulation and a steeper yield curve.

Asset Allocation Returns to 'Balance' and Diversification

JPMorgan believes that when adjusting investment directions for 2026, investors should first ask themselves several key questions: Is the goal return, capital preservation, or growth? In this process, can they tolerate volatility or prefer low risk? Is liquidity important?

The current macroeconomic environment remains complex: economic growth is slowing but has not stagnated, low unemployment rates mask slowing employment growth, consumption performance is uneven between high net worth groups and middle- and low-income groups; inflation remains high in the short term but is expected to decline in the second half of 2026; at the same time, major policy changes are underway. Under this volatility, investment opportunities have already changed.

The attractiveness of bonds in the market is rising, and investors have increased their allocation to medium-term bonds, but most investors overall still prefer short-duration bonds, with sensitivity to interest rate changes lower than the market benchmark, meaning that if interest rates fall in the future, medium- and long-term bonds may bring better return potential. In the current interest rate environment, bonds are an effective tool against recession. Credit assets are similar: a mild macroeconomic environment is conducive to increased allocation, but if a recession is worried about, active management should be emphasized.

In terms of stocks, the strong profit growth of the 'U.S. Big Seven' over the past three years has extended the strong performance of growth stocks, causing investors to underallocate other markets. Although from an index level, the value stocks and growth stocks in the U.S. stock portfolio seem balanced, specific holding analysis shows a bias towards growth stocks. In addition, investor interest in international markets has cooled after a significant rise in early 2025. For the full year, non-U.S. stock allocations have risen from an average of 20% to 25%. Although there has been an increase, it is still below the 'diversified' level. This underallocation is too significant: the structural improvement trend in international markets is expected to continue, keeping them competitive. At the same time, the breadth of the U.S. stock market performance has not improved as expected, but the direction is correct: the contribution of the Big Seven to the S&P 500 index in 2025 has decreased compared to previous years, profit growth is gradually expanding, and analysts predict that the profit growth rate of the Big Seven and other companies tends to balance. This means that when overall valuation is at a multi-year high, selected value sectors should play a greater role in 2026, while growth stocks will still benefit from long-term structural trends such as AI.

For other investments, goal-based allocation methods are particularly important. Each major asset class will play a specific role in the portfolio: high public equity valuations may constrain future returns; falling interest rates reduce return opportunities; the correlation between stocks and bonds should remain positive in a non-recession environment. At the same time, with regulatory adjustments and technological advancements, the accessibility of other assets for ordinary investors is improving (lower thresholds, enhanced liquidity). Therefore, the traditional '60/40' stock/bond framework should be changed, introducing other assets to form a '60/40+' model. Incorporating other assets into the portfolio based on investment goals can achieve more stable, low-correlation, and lower volatility returns.

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