The headline numbers might look fine, but dig a little deeper and 2026 starts to look like two different economies running side by side. That's the takeaway from JPMorgan Asset Management's latest outlook, which paints a picture of resilient growth masking some deeply uneven dynamics underneath.

Think of it as a K-shaped recovery that just won't quit. Wealthier households and cash-rich corporations are doing great, pulling further ahead with each quarter. Meanwhile, middle-income consumers and rate-sensitive sectors like housing remain stuck in what JPMorgan politely calls "soggy" territory. Not exactly the rising tide lifting all boats.

The firm expects another year of U.S. economic expansion, buoyed by heavy fiscal support from the One Big Beautiful Bill Act. Real GDP should hold above 3% in the first half of the year before cooling to somewhere between 1% and 2% later on. Inflation might follow a similar arc, potentially climbing toward 4% year-over-year before sliding back down to 2% by December.

But policy is where things get interesting and volatile. JPMorgan highlights three forces worth watching closely.

Tariffs are already making a big impact. Dramatic increases in U.S. tariffs have been pulling in over $29 billion in monthly revenue from June through October. So far, retailers have absorbed much of the cost, but the bank expects that pain to increasingly land on consumers in late 2025 and early 2026. That means a temporary inflation bump and less real spending power just when the economy is trying to maintain momentum.

Immigration policy presents another headwind. A sharp decline in net immigration is likely to produce an outright contraction in the working-age population. The result? Unemployment stays roughly stable, but job growth hits a ceiling and long-run GDP potential takes a hit. Fewer workers means less economic capacity, plain and simple.

AI investment remains the wild card. JPMorgan projects data center and AI capital expenditure will reach roughly $588 billion in 2026, equivalent to about 1.2-1.3% of U.S. GDP. AI continues to drive U.S. earnings strength and is becoming an increasingly important engine of global growth. But the risks are real. If adoption disappoints or input constraints like power and chips become binding, the whole story could shift fast.

What This Means for Bonds and Stocks

JPMorgan isn't expecting the Federal Reserve to rush into rate cuts, even if markets keep hoping for them. With inflation still hovering around 3% and tariff effects in play, the bank sees a "more patient" Fed ahead. Their forecast puts 2-year Treasuries around 3.5-3.75% and 10-year yields in a 4.0-4.5% range, with some modest curve steepening. That's a notably cautious view given President Donald Trump's consistent pressure for lower rates.

The bank's advice for fixed income investors heading into 2026? Focus on duration rather than trying to perfectly time direction, and prepare for rate volatility. As JPMorgan puts it, "More than trying to perfectly capture yield levels, investors should lean into the income in fixed income, especially tied to solid corporate, consumer, and municipal balance sheets." The iShares 10 Year Investment Grade Corporate Bond ETF (IGLB) has gained 3.28% year-to-date, capturing some of that dynamic.

Inflation hedges like TIPS and commodities still deserve a spot in portfolios, according to the bank. And with rising domestic debt and inflation uncertainty, non-U.S. sovereigns and emerging market local-currency debt offer valuable diversification.

On the equity side, JPMorgan acknowledges that valuations look stretched but stops short of declaring a bubble. The Magnificent 7 tech giants still dominate earnings and capital spending, though the bank expects some broadening of profit growth across sectors.

Here's where it gets compelling: international equities outperformed U.S. markets by about 1,520 basis points in 2025, and JPMorgan thinks that catch-up trade has legs. The U.S. dollar still sits roughly 10% above what the bank considers fair value. The U.S. equity premium over international markets stands at 34%, well above the 19% long-run average. And with the U.S. still representing over 65% of global benchmarks and 40% of domestic market cap concentrated in just 10 names, there's room for a gradual rotation.

The strategy JPMorgan suggests? Tilt toward select value and international markets while keeping core exposure to secular AI winners. Investors following this playbook might watch ETFs like the Core MSCI Emerging Markets ETF (IEMG).

Four Themes Worth Paying Attention To

Looking beyond the immediate outlook, JPMorgan identifies four structural themes that are hard to ignore.

First, positive nominal growth and the end of negative rates are breathing new life into European and Japanese companies, especially in financials. Second, the AI story continues to expand beyond U.S. tech giants into semiconductors, cloud services, and robotics across Asia and emerging markets.

Third, major fiscal spending in the Eurozone and Japan is driving government investment in infrastructure and defense, which benefits domestic companies. And finally, a growing emphasis on shareholder returns including buybacks and higher dividends is spreading globally, as Europe and Asia increasingly adopt practices that were once uniquely American.

The bottom line for 2026? Growth continues, but it won't feel like growth for everyone. Policy volatility will keep things interesting, and the smart money might be looking beyond U.S. shores for opportunities the market hasn't fully priced in yet.