J.P. Morgan says the artificial intelligence-led market rally is likely to weather the latest tariff threats and a looming U.S. economic slowdown, citing resilient tech fundamentals and growing institutional demand.
In a note to clients, the bank said higher tariffs could dent growth enough to push the Federal Reserve into action, with the first rate cut now expected by December. The bank lowered its 2025 U.S. GDP growth forecast to 1.3%, down from 2%, but said robust corporate profits and solid business investment should help cushion the blow.
J.P. Morgan strategists now expect as many as four Fed rate cuts by early 2026, bringing the target range down to 3.25%–3.50%. Still, they argue that the broader macro outlook remains supportive of risk assets.
“The AI trade is evolving,” the note said, highlighting a shift from retail-driven speculation to more durable inflows from institutional and systematic strategies. That dynamic, along with strong earnings and balance sheets across the tech sector, should keep the rally intact, even as policy risks mount.
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It seems a little incongruous to call a first cut in December and then four in total for early 2026?
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