But what if you had to sum all of this up in one word? Well, thanks to the powers of AI, you can. Fortune fed the 2026 outlooks of 15 of Wall Street’s biggest banks into a Perplexity model, and asked it to summarize them all with a single word:
It spat out “precarious.”
In a note titled “Promise and Pressure,” J.P. Morgan Wealth Management CEO Kristin Lemkau noted that in 2026, “AI is set to transform industries and investment opportunities, but it also brings the risk of overenthusiasm.” Big Tech has tripled its annual capital investment (capex) spending from $150 billion in 2023 to what could be over $500 billion in 2026, JPM notes, and nearly 40% of the S&P 500’s market cap feels the direct influence of either the perceptions or realities related to AI usage.
The third is obscuring risk, for example, through lax underwriting or financial standards. The bank noted it is “searching for signs” of such behavior, and highlighted concerns about “circular” investments within the AI supply chain.
On the speculation front, there was a relatively clean bill of health: “Exuberance is building, but it would need to reach much higher levels before we would grow more cautious.” And finally, on the gap between valuations and cash flows, the wealth management arm highlighted that in the dotcom era companies went public with no revenue, but now “AI companies have generated their returns entirely through earnings growth.”
JPM concluded: “It seems clear that the ingredients for a market bubble are present. That said, we think the risk that a bubble will form in the future is greater than the risk that we may be at the height of one right now.”
2026 looks “anything but dull,” according to Deutsche Bank’s global outlook. Internal political fragmentation will be a hindrance in Europe, economists Jim Reid and Peter Sidorov wrote, while the U.S.-China rivalry may rear its head in November when the current yearlong trade truce expires.
Recession probabilities “are somewhat elevated given the precarious nature of the labor market,” the duo added.
He was echoed by Goldman Sachs, with chief economist Jan Hatzius writing in his outlook that the main vulnerability for the U.S. economy is the labor market, with softness potentially placing the country into recession territory. While Goldman is optimistic this will be avoided, Hatzius said it is “too soon to dismiss” the prospect.
Labor chatter has also been the key force shaping the trajectory of the Fed in recent months, allowing for cuts despite the other side of the mandate—inflation—sitting stickily above the target of 2%. Indeed, some analysts aren’t expecting it to be close to target for a few years yet.
If such price rises do come to pass, it could halt the easing cycle many analysts are expecting from the Fed over the next few years—even if the central bank has a more dovish chair at the helm.
Since the end of the pandemic, Wall Street has been continually taken aback by the remarkable resilience of U.S. consumers.
Deutsche Bank concluded: “While our global economists and strategists are largely positive for 2026, expect no layup in volatility and sentiment swings.”
