JPMorgan: In a Cyclical Mindset
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JPMorgan describes a global economy marked by resilience, sticky inflation, and tightening labor markets. The energy shock is fading, though geopolitical risks linger, while the U.S. effective tariff rate has climbed to 11.1% and global AI capital expenditure is projected to grow 75% in 2026—two forces reshaping trade and investment. Solid micro fundamentals, including elevated corporate profit margins and healthy household balance sheets, combined with front-loaded fiscal easing (such as OBBBA policies), are laying the groundwork for a U.S. goods-sector recovery in the first half of 2026. Service prices remain notably sticky, however, as labor costs stay elevated, keeping U.S. core CPI around 3%, supported by rents and core services. Labor markets show potential to re-couple, yet high service-sector wage costs sustain inflation persistence. On policy, JPMorgan expects the Federal Reserve and Bank of England to hold at upcoming meetings, while the European Central Bank is seen cutting 25 basis points. The bank argues markets may not yet fully price the upside to future activity and policy rates implied by this backdrop.