2026 Outlook for the US Economy

JP Morgan Asset Management’s 2026 Year-Ahead Investment Outlook says the United States (US) economy should hold up next year, but in a sharply uneven way.

It describes a K-shaped expansion, where different groups move in opposite directions. Higher-income households and artificial intelligence (AI)-linked industries continue to grow, while middle-income and lower-income consumers face weaker wage gains, higher borrowing costs, and tighter budgets.

The report argues that policy shifts will shape much of 2026. Higher US tariffs and stricter immigration rules push growth and inflation up early in the year as fiscal refunds and stimulus filter through, then cool the economy later as labour supply tightens and spending slows.

On monetary policy, JP Morgan expects only shallow rate cuts, with the Federal Reserve likely to trim rates two to three times. Bond yields remain volatile but broadly range bound.

Equities, the report says, are being driven more by structural forces than by the classic economic cycles or the usual rise and fall of growth that investors traditionally use to time their investment decisions.

In JP Morgan’s view, long-term forces such as AI adoption, rising capital spending on data infrastructure, productivity gains, regulatory changes in financials, and shifts in global supply chains now matter more than where the US sits in the cycle. These structural drivers can keep certain sectors strong even if broader growth cools.

The report also argues that international markets look more attractive than earlier in the decade. Stronger nominal growth, rising government investment, improved shareholder practices, and broader AI adoption across Asia, Europe, and Japan are expected to narrow the long-standing earnings gap with the US. A weaker dollar may add further support to international equities by making their earnings and assets more attractive to global investors.