At the year’s midpoint, investors face a landscape shaped by surging AI investment, geopolitical uncertainty and diverging economic fortunes. The AI boom is powering exceptional growth in technology and semiconductors, while higher energy prices and global tensions add complexity to inflation and consumer sentiment. Shifting central bank policies and evolving global trends are redefining the outlook for fixed income, international equities and alternative assets. In this episode, join Gabriela Santos, Chief Market Strategist for the Americas, and Dr. David Kelly, Chief Global Strategist, as they present their mid-year outlook and share timely insights for navigating today’s market crosscurrents. Watch the video version on YouTube. Subscribe to the Notes on the Week Ahead podcast for more insights from Dr. David Kelly: Apple Podcasts | Spotify

2026 Mid-Year Outlook: Crosscurrents and Divergence Amidst an Increasing AI Surge

Insights Now

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**Podcast:** Insights Now

## Transcript

Welcome back to Insights Now. I'm your host, Gabriela Santos, Chief Market Strategist for the Americas here at J.P. Morgan Asset Management. We're now at the halfway point of the year and so much has already happened. So it's a great time to reflect back on our year ahead outlook and what we got right and what we got wrong. Importantly, it's a time to take stock of what we've learned and to reposition portfolios for what may lie ahead.

So to discuss our mid-year outlook entitled Crosscurrents and Divergence Amidst an Increasing AI Surge, I'm excited to be joined by David Kelly, Chief Global Strategist here at J.P. Morgan Asset Management. Welcome, David. Glad to be here. So, David, I want to get started with you as you were recently sitting down to write our U.S. economy and global economy section. What struck you as the most surprising thing versus what you had written for the year ahead outlook?

Well, a few things. I think a good way to look at it is at the start of the year, my forecast was 2-0-2-4, kind of like it was two years ago, which is 2% growth, zero recessions, inflation running at about 2% and unemployment ending the year at about 4. Halfway through, you know, I'm sort of a decade later, I'm 2-0-3-4. I think we'll still average about 2% growth for the year.

I think it will still avoid a recession, but for reasons which we'll get into, it looks like inflation will be hotter, so maybe 3% year over year on inflation by the end of the year. And I still think the unemployment rate will come down to 4%. And in the midst of, you know, with that changing forecast, what really moved the needle here? I think there were three things. First of all, income tax refunds weren't quite as strong as we thought. Now, they were up 18% in terms of the total value of refunds paid out this filing season relative to last year.

We actually thought it was going to be more than that based on the original cost estimates from the OBBBA. So consumers got some assistance from income tax refunds, but not as strong as we thought. And that is keeping consumer spending just a little bit slower in the middle of the year than we thought it would be. Offsetting that though, the AI surge has been even stronger. I mean, we keep on updating our numbers in terms of how much the various hyperscalers are going to spend on capital spending this year.

But we're seeing these broadening ripples from this extraordinary AI splash. And so it's not just affecting these companies. Financials are having a very good year because of the earnings, because of a new renewed M&A boom and IPO boom, which is pretty much related to the good stock market. We're seeing good returns out of utilities and a lot of spending on infrastructure. So overall, that part of the economy is doing very well.

And if you look at even in first quarter GDP, you look at the strength that we saw in investment spending on equipment and also investment ...

2026 Mid-Year Outlook: Crosscurrents and Divergence Amidst an Increasing AI Surge

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2026 Mid-Year Outlook: Crosscurrents and Divergence Amidst an Increasing AI Surge

Transcript

Built for investment professionals

Every day you wait, your competitors are findingedge in conversations you're not hearing.

Every day you wait, your competitors are finding
edge in conversations you're not hearing.