JPMorgan’s chief global economist Bruce Kasman titled the bank’s mid-year outlook “Promise and Pressure.” He published it on June 28. The two words are doing a lot of work in a year that has moved faster than most forecasters expected.The promise is that global growth is stabilizing in the second half of 2026. The pressure is that inflation has not retreated as much as the bank had projected at the start of the year. The energy shock from the Hormuz conflict has made both of those things harder to read cleanly.Why JPMorgan sees global growth rebounding in 2026JPMorgan’s mid-year global outlook projects GDP growth of 2.5% for 2026, with the bank expecting growth to run at or above potential across most developed markets. The recovery is being driven by three factors Kasman identified: a surge in technology spending from U.S. hyperscalers, improved business confidence, and labor markets beginning to recover from near-stall conditions in 2025.”Labor markets have been quite weak. Job growth has nearly stalled across the major economies,” Kasman said in the outlook’s commentary. Related: JPMorgan sees inflation problem investors are missingHe expects that to change as the sentiment shock from 2025’s trade war fades and monetary and fiscal conditions align to support a broader recovery.JPMorgan puts the probability of a U.S. and global recession in 2026 at 35%, above background risk, but not the base case. The bank expects a rebound to show up in Q3 and Q4 data as the drag from 2025’s trade war sentiment shock fades.Kasman’s take on sticky inflation and Hormuz energy shockThe inflation picture required a mid-year revision. At the start of 2026, JPMorgan had forecast that global inflation would remain stable. The Middle East conflict and Hormuz closure disrupted that forecast.”The energy price spike is now raising inflation and generating a sharp squeeze on household purchasing power that could intensify if the Middle East conflict keeps the Strait of Hormuz closed,” Kasman said, according to JPMorgan’s global inflation forecast.More Economy:JPMorgan sends another message on strait of Hormuz, oil pricesWarren Buffett has a message on energy prices for all AmericansGoldman Sachs sends strong message on next Fed rate cutGlobal core inflation has been sitting at around 3% with little movement either direction. European inflation may converge toward target, but U.S. inflation is expected to stay near 3% through the year. Kasman noted that inflation dynamics are now driven more by local labor market conditions in each economy, not by shared global commodity shocks as they were during the post-COVID period.Household spending has held up in the data. JPMorgan’s figures showed global real retail sales outside China running at a 2.7% annualized pace over the most recent three months. Whether that continues depends largely on whether energy prices keep rising or begin to ease.”The immediate issue is the resilience of consumers through this squeeze,” Kasman said.
JPMorgan does not expect Federal Reserve rate cuts this year.Andrey/Getty Images
What JPMorgan’s inflation forecast means for the Fed and interest ratesJPMorgan does not expect Federal Reserve rate cuts this year. It projects a rate hike in 2027, with the risk tilted toward an earlier move if inflation proves more persistent. The ECB and the Bank of Japan are both expected to raise rates this cycle, not cut them. Six months ago, easing was the dominant expectation across major central banks. That picture has reversed.Minutes from the Federal Open Market Committee’s April meeting reinforced the hawkish tone, noting that “some policy firming would likely become appropriate if inflation were to continue to run persistently above 2%.” As TheStreet reported, the cacophony of hawkish Fed voices has grown louder as war-fueled inflation risks outweigh concerns about the labor market. JPMorgan’s view is consistent with that signal rather than the rate-cut narrative that was circulating at the start of the year.Oil prices are a key variable in the H2 picture. JPMorgan is working with an assumption that Brent crude ends 2026 between $80 and $90 per barrel before falling below $80 in 2027. If the Hormuz situation stabilizes and crude follows that trajectory, it takes the largest single inflation pressure off the table for the second half, according to JPMorgan’s Asset Management macro outlook.What JPMorgan’s 2026 economic outlook means for investors and marketsMislav Matejka, JPMorgan’s global equity strategist, does not see a broad rally coming across stock markets. His read is that developed and emerging markets will perform differently from each other, and that picking the right exposure matters more now than it did when most markets were moving together. As TheStreet reported, Wall Street’s rate-cut narrative has fully inverted, with sticky inflation and labor market resilience now reshaping how investors position across asset classes.Growth picking back up is good for risk assets in general, but interest rates staying elevated works against valuations. Those two things are pulling in opposite directions at the same time, which is what makes selectivity the operative word for JPMorgan’s equity team heading into the second half.Companies with pricing power, exposure to the AI capital expenditure cycle, and strong margins are in a better position than those dependent on cheap financing or broad consumer demand. JPMorgan’s mid-year outlook flagged U.S. hyperscaler spending as still accelerating, and noted that it is powering growth in the markets supplying chips and infrastructure to the American AI buildout as well.JPMorgan’s take on 2026 is that both things Kasman put in the title are true at the same time. Growth is recovering. Inflation is still present. Investors who build their portfolios around that tension will be better prepared than those waiting for one of the two to disappear.Related: Moody’s issues stark warning on the economy