JPMorgan Asset Management’s top strategist on the outlook for 2026

It’s that time of year again, when Wall Street’s scribal class issues their end-of-year outlooks — reports on what analysts and researchers think might be in the cards for the market next year.

Of course, nobody really knows. But these reports are still a useful exercise in organizing one’s thoughts and sketching out expectations and themes that may be coming down the pike.

Last week, we grabbed a few minutes on the phone with David Kelly, chief global strategist with JPMorgan Asset Management, after the money manager published its 2026 outlook.

A couple high-level takeaways:

• The US economy is about to get a big stimulus bump from the Trump administration’s Big Beautiful Bill.

• The Fed might not cut as quickly as the market seems to be hoping.

• It might be time to add more foreign market exposure to portfolios.

One big, beautiful tax refund

JPMorgan Asset Management analysts see a “bumper crop” of tax refunds heading to roughly 75% of American households early next year as a result of the One Big Beautiful Bill Act that Republicans pushed through Congress and President Trump signed back in July.

“It’ll do exactly what stimulus checks normally do, which is pump up consumer spending,” Kelly said.

The bill included several provisions that the president campaigned on, including cuts to taxes levied on tips and overtime, an increase to the child tax credit, and a hike for the standard deduction, among others.

“As far as we can estimate, the average income tax refund this year is going to come in at $3,200. And for next year, it’s going to come in at $4,000. So it’s an extra $800 spread out over 75% of households,” Kelly said.

Those refunds are “why we are very reluctant to call for recession, even though we can see some weakness in economic data right now,” he said.

The money management arm of JPMorgan expects that GDP growth could ramp up to more than 3% in the first half of 2026, before falling back to between 1% and 2% later in the year.

...that could mean Fed cuts might not come on cue

While faster-than-forecast growth would be a potentially positive backdrop for stocks, there could be a downside for the markets if that economic pep means the Federal Reserve holds off on rate cuts, or drags its feet on delivering them.

JPM Asset Management’s outlook calls for 2- to 3-quarter point cuts next year, which is in line with market expectations.

“But, you know, how fast they get there will to some extent depend on the stimulus,” Kelly said, suggesting that some of those cuts could come later in the year than the market may be expecting, as a result of better-than-expected growth early on.

What’s more, other forms of quasi stimulus could materialize for the economy.

For instance, the administration has recently floated the idea of $2,000 “tariff rebate” checks for American households. And on top of that, if the Supreme Court moves to throw out the administration tariffs at the heart of President Trump’s trade war, that could also boost growth and lower inflation, Kelly said.

“Could you actually have both? Could the tariffs get thrown out and they hand out tariff rebate checks at the same time?” Kelly asked. “Both of which would tend to goose up the economy and give the Fed very little reason to to be cutting.”

More might start looking abroad for performance

The last three years have been gangbusters for US markets, with the S&P 500 rising 24% in 2023, 23% in 2024, and 16.5% so far in 2025. In itself, that three-year gain — within spitting distance of 80% — is the source of another problem, JPM Asset Management says.

“The biggest risk for investors remains the elevated starting point for risk assets, especially in the United States,” the company said in its report on what to expect next year.

This reflects, in part, the tendency for markets to mean revert, a fancy term of art that means to balance out periods of great performance with other stretches of subpar or mediocre results.

If markets do behave this way, the odds of an unspectacular stretch for US stocks are rising.

Another risk investors face after this great run for US stocks is the phenomenon known as “portfolio drift,” Kelly says. This is when the best-performing parts of someone’s investment portfolio — in recent years, that’s been large-cap technology shares — tend to become overconcentrated bets dominating the direction of investment results. That is, unless investors intentionally counteract that drift by thoughtful and regular rebalancing.

Portfolio drift is why relatively few American investors were able to catch the upswing that made emerging markets and international stocks some of the best investments to own this year, Kelly said.

Through Friday, Japan’s Nikkei 225 was up roughly 26% year to date. Hong Kong’s Hang Seng was up 29%, and Brazil’s Bovespa was up 32%, for example.

But after underweighting international stocks for years, Kelly has a hunch that American investors could start to dip their toes back into the sector next year.

“At the end of this year, people are going to look at their statements. And at the top of their statements is going to be the performance of emerging markets and European equity for those who have them,” Kelly said. “There’s nothing like good performance to lure money in.”