- JPMorgan has a few ideas on where investors should look for opportunities heading into 2026.
- Strategists said they favor a barbell portfolio split between key sectors of the US market.
- The bank also sees opportunities in international stocks, particularly in banking, healthcare, and mining.
The stock market has been volatile in the fourth quarter, but strategists at JPMorgan said they believe it's time for investors to strategically load up on stocks.
The bank is feeling optimistic on the outlook for equities through the end of the year, following a weak November for the broader market as investors wrestled with concerns about the AI trade and questioned the path of Fed rate cuts.
But the market has a handful of key catalysts that should carry stock prices higher into early next year, according to Andrew Tyler and Federico Manicardi, two leading strategists on JPMorgan's market intelligence desk.
Here's what's driving the market:
- Strong US outlook. Despite signs of weakness in the job market, the US economy looks to be on strong footing overall. Consumers, which account for two-thirds of GDP, look to be in a "healthy position" from a debt perspective, Tyler said. Meanwhile, there are no signs that a weaker labor market is a "significant risk" to the broader economy in the near-term, he added. The economy is expected to have grown by 3.9% year-over-year in the third quarter, according to the latest estimate from the Atlanta Fed GDPNow tool.
- Corporate earnings. Companies have posted consistently strong financial results. Of the S&P 500 firms that have reported earnings for the third quarter, 83% have beaten analysts' estimates. The index is also on track to report its highest revenue growth in three years, according to the latest update from FactSet.
- Ebbing tariff concerns. The tariffs that President Donald Trump announced in April are shaping up to be better than markets originally feared. The US's average effective tariff rate has declined steadily throughout the year, a trend that's expected to continue into 2026, Tyler said.
- Strong international outlook. The outlook for international stocks also looks promising next year, Manicardi said. China's economy, for instance, looks like it's in an "early stage of recovery" from its recent downturn. Economic activity is also revving up across Europe.
"We are tactically bullish, and we look for markets to rally into early 2026," Tyler said.
The team said it favored a barbell portfolio, a strategy where investors largely split their portfolio between high- and low-risk assets. That can allow investors to chase some high-yielding investments, while having downside protection should markets swing in the other direction.
Here are the bank's three highest-conviction investing ideas going into next year:
1. AI stocks
On one side of the barbell, the bank favors mega-cap tech stocks, particularly those associated with artificial intelligence, Tyler said.
Despite a hiccup in November, AI stocks still make up the market's highest-flying investments in 2025. The Roundhill Magnificent Seven ETF, which is made up of the seven heavy-hitters of the AI trade, is up 23.7% this year.
2. Cyclical stocks
On the other side of the barbell, the bank favors cyclical stocks, which tend to outperform when the economy is expanding. That will allow investors to take advantage of the coming "reboot" to economic growth, Tyler said.
Key sectors in the area to watch:
- Bank and financial stocks
- Materials stocks
- Energy stocks
- Consumer stocks, like retailers, airlines, and transports
3. Key areas of global stock markets
Manicardi highlighted potential opportunities in regions such as China, Europe, Japan, and India.
Here are the key international sectors the bank is focused on:
- Bank stocks
- Stocks in the "electrification" theme, like energy and utilities
- Healthcare stocks
- Mining stocks
- Luxury stocks
- Renewables stocks
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