JPMorgan's Jordan Jackson on Jobs Report, AI Trade, and 2026 Market Outlook

Jobs Report Significance

• 📌 The upcoming jobs report is considered important but unlikely to significantly alter market expectations or Fed policy.
• 💡 The data is expected to confirm a cooling labor market that is slowing but not collapsing, suggesting the Fed is in a comfortable position.

AI Trade Dynamics

• 🚀 The AI theme is shifting from an indiscriminate rally to a period of differentiating winners and losers.
• ⚠️ Skepticism is increasing regarding AI investments, with questions about the growth rate and return on significant capital expenditures.
• 💰 Companies are still flush with cash, but increased debt for AI investments and a large supply of new debt could impact credit markets and spreads.

Market Outlook for 2026

• 📈 JPMorgan Asset Management remains bullish and optimistic on markets for the next year, despite potentially lower returns than the previous three years.
• 🎯 A high single to low double-digit return is anticipated, with a potential for cyclical value areas to provide durability.
• 📊 Financials, industrials, and materials are favored sectors, while energy remains a wildcard due to oil price outlook.

Economic Backdrop

• 🏦 The yield curve is expected to continue steepening, which generally supports cyclical value-oriented sectors.
• 🛠️ The "big beautiful bill" allowing expensing of domestic R&D may lead to more traditional capex spending on equipment and structures, alongside continued AI spending.