JP Morgan refutes "AI bubble theory" and predicts that the S&P 500 is expected to rise by 20% to 8,200 points next year!

J.P. Morgan Private Bank stated that the S&P 500 Index is expected to continue its strong return trend in 2026. As of now, the index has already risen by 16% this year, with at least a 23% increase in the previous two years. The company's base prediction is that with the acceleration of economic growth, robust profit performance, and steady development of AI technology, the index will rise to 7400 points next year, an increase of about 9% from the current level. If these favorable factors are strong enough, the index may even soar to 8200 points, meaning an increase of 20% from now until the end of next year. This optimistic forecast from J.P. Morgan comes at a time when Wall Street is worried about various concerns regarding artificial intelligence and signs of economic weakness. Over the past four days, the U.S. stock market has risen by 4%, which has calmed down the bearish warnings of a comprehensive market correction and now the bullish sentiment among U.S. stock investors is on the rise again. For Jacob Manoukian, Head of Investment Strategy for J.P. Morgan Private Bank in the U.S., and Stephen Parker, Co-Head of Global Investment Strategy, the recent market volatility that saw the S&P 500 Index drop by as much as 5% from its record high in October confirmed that the market is not in the usual speculative bubble state. Parker said in an interview on Tuesday, "Many of our clients currently have a lot of cash on hand. For these clients, the discussions we have had with them over the past 12 to 18 months are that this is a great opportunity. We see it as a buying opportunity, while also understanding that it may not necessarily be the lowest point." The bank believes that in 2026, technology and utilities will be key investment areas as these industries will benefit from artificial intelligence technology. Additionally, healthcare, industrial, and financial sectors are also expected to perform well for various reasons including market expansion, regulatory easing, and mergers and acquisitions. The company also recommends clients include "buffer factors and shock absorbers" in their investment portfolios such as infrastructure, physical assets, and gold to hedge against inflation. The company states that the private market will continue to provide opportunities for returns. Manoukian said, "We firmly believe that we are in a more structurally transformative phase, where the differences between public and private markets are becoming increasingly blurred. If you want to invest thematically without entering into the private market, you are in effect isolating yourself from one of the most vibrant and innovative areas of the artificial intelligence ecosystem." The optimistic forecast from the private bank aligns with the stock research team of the investment bank. Strategist Dubravko Lakos-Bujas believes that the S&P 500 Index will rise by about 10% to 7500 points by the end of 2026 thanks to strong profit growth and the Fed's interest rate cuts - the index may even reach 8000 points if inflation cooling allows officials to relax monetary policy more times than expected. Initial predictions from financial institutions show that analysts generally expect strong growth in the market by 2026. Binky Chadha of Deutsche Bank expects the S&P 500 Index to rise by about 18% to 8000 points by the end of 2026. The strategy team at Morgan Stanley predicts the index will rise to 7800 points a year from now. Despite the optimism presented by J.P. Morgan Private Bank, strategists are still considering a pessimistic scenario where the S&P 500 Index could fall to about 4600 points, a decrease of 32% if the artificial intelligence theme and the economy experience a downturn. For Manoukian, while this technology brings many opportunities, there is also a "significant risk" if the models stagnate or spending does not turn into profits. For Parker, if inflation accelerates again and officials continue to adopt loose policies due to political pressure, the independence of the Federal Reserve could become a potential issue in the macroeconomic sphere. However, with strong corporate earnings and robust economic performance currently, they still maintain optimistic expectations. Manoukian said, "This year the market situation is actually very simple and convincing, which is that U.S. companies have exceeded expectations every quarter, leading to a 15% increase in the S&P 500 Index, with no significant increase in valuation multiples. We expect to continue this profit-driven growth trend next year."