Odds of US staying in expansion mode in 2026 80%: J.P Morgan experts

That’s not a “nothing can go wrong” call; it’s a strong vote of confidence in the resilience of the underlying economic environment, global investment strategists at the investment firm Federico Cuevas and Justin Biemann wrote.

“That matters because 2025 gave investors plenty of reasons to doubt the outlook. Tariffs, immigration and policy noise fuelled volatility and forced many economists to trim growth forecasts. Yet the economy kept moving—in Q3 2025, real gross domestic product (GDP) grew at a 4.3 per cent annualised rate, far exceeding the initial expectation of roughly 3.3 per cent. Our view is that this resilience extends into 2026,” both wrote.

Both anticipate inflation to remain range-bound—still above target, but not broadening to the stickier components—which should allow the US Federal Reserve to maintain an easing bias.

“In fact, we’re anticipating one additional rate cut this year—not a signal of aggressive easing, but a move that keeps rates on a lower trajectory. That matters because it keeps financial conditions supportive,” they remarked.

There are three reasons why both think growth will stay supported in 2026: they expect the labour market to improve from now; capital expenditure will keep the cycle moving; and the One Big Beautiful Bill Act (OBBBA) will add a policy tailwind.

Even though labour demand remains weak, further deterioration is unlikely because margins are near historic highs, talk of job cuts is limited, and early signs of small-business hiring are emerging, the experts wrote.

Lower rates and steady real incomes should help stabilise conditions. The labour market doesn’t need to get red-hot; it just needs to stop sliding. "We believe it will," they mentioned.

The investment impulse looks durable, and easier financial conditions help extend the runway. Artificial intelligence (AI) capital expenditure is a meaningful driver, but capital expenditures beyond AI, from transportation equipment and industrial machinery to non-residential structures, are expected to expand in tandem with easier financial conditions, they said.

The OBBBA is a potent pro-growth surge delivering fiscal support and targeted incentives. Rising tax refunds early in the year should buoy consumer spending and spur business investment, they added.

The experts estimate that US consumers will receive an extra $50-$100 billion, about 0.2-0.4 per cent of annual disposable income.

ALCHEMPro News Desk (DS)