For some, the festive period is a chance to reflect on the year just gone. For others, it is a moment to start positioning for what comes next.
With that in mind, this is very much the season for looking ahead. Today, we turn to JPMorgan’s London-based analysts and their core views for 2026, which point to artificial intelligence, a revival in mergers and acquisitions and a more fertile environment for stock picking as the forces most likely to shape returns.
The US investment bank strikes a cautiously constructive tone. More sectors are rated positively than negatively, upgrades outnumber downgrades, and analysts are leaning towards companies where earnings momentum or identifiable catalysts are expected to emerge over the next 12 to 18 months.
AI remains the dominant cross-sector theme, but the emphasis is changing. JPMorgan argues the market is moving beyond early-stage hype and into a phase of practical adoption, where AI investment feeds directly into productivity gains, margin expansion and revenue growth. At the same time, easing financial conditions and strategic pressure are expected to revive corporate dealmaking after a subdued period.
Against that backdrop, JPMorgan has refreshed its list of high-conviction Overweight and Underweight calls, highlighting where it believes consensus expectations are either too optimistic or too cautious heading into 2026.
AI moves from concept to earnings driver
Artificial intelligence runs through almost every sector in JPMorgan’s outlook. The common thread is not headline-grabbing technology, but how companies are embedding AI into operations, data platforms and infrastructure.
In financial markets, London Stock Exchange Group (LSE:LSEG) is highlighted as a beneficiary of this shift. JPMorgan sees the group’s integration of data and analytics into AI-driven platforms as a growth lever that is not yet fully reflected in the share price, with scope for new distribution channels and product use cases as customers increasingly interact with financial data through AI tools.
Telecoms equipment is another area where AI-driven infrastructure demand is expected to support earnings. Nokia (NYSE:NOK) is a preferred name within an otherwise challenged sector, with JPMorgan pointing to its exposure to optical networks and IP routing, both central to handling the surge in data generated by cloud computing and AI workloads. The bank expects these divisions to deliver mid-teens earnings growth if management meets its targets.
In semiconductors, analysts remain constructive on capital equipment suppliers as the memory cycle turns. Capital spending by chipmakers is expected to recover as pricing improves, with ASML (NASDAQ:ASML) singled out as the key beneficiary of any upturn in fabrication investment.
Deal activity set to return
Alongside AI, JPMorgan expects conditions for mergers and acquisitions to improve in 2026. Corporate balance sheets are stronger than in previous cycles, while management teams face growing pressure to deliver growth in a slower macro environment.
Although the bank does not base its investment case on takeover speculation, it highlights telecoms, mining and parts of industrials as areas where consolidation could accelerate. In these sectors, scale and cost efficiency are becoming increasingly important, favouring companies with strong cash generation or differentiated assets.
An uptick in deal activity, the analysts add, often brings renewed investor attention to sectors that have been overlooked, creating opportunities beyond the immediate transaction headlines.
More positives than negatives
JPMorgan’s sector outlook shows a modest tilt towards optimism. Financials, industrials and parts of technology are viewed favourably, while consumer staples, chemicals and some areas of insurance remain under pressure.
Within European banks, value is seen in names where returns on equity are improving but valuations remain depressed. Barclays (LSE:BARC) is cited as a stock where expectations could reset higher as management outlines its strategy for the next phase of the business.
Industrials also feature prominently. Rolls-Royce (LSE:RR.) is one of JPMorgan’s preferred UK names, supported by continued margin improvement, stronger cash generation and the potential for further capital returns. Analysts expect self-help measures to remain a key driver of earnings into 2026.
By contrast, chemicals remains a sector where JPMorgan is cautious. Weak demand, excess capacity and pricing pressure continue to weigh on earnings, with BASF rated Underweight and forecasts sitting below consensus.
That said, the bank stresses that even within challenged sectors there are exceptions. Croda International (LSE:CRDA) is highlighted as a top-conviction Overweight, backed by its focus on higher-margin specialty ingredients and evidence of more resilient organic growth.
Stock picking back in focus
One of the clearest messages from JPMorgan’s 2026 outlook is that dispersion between stocks is likely to remain wide. Returns are expected to be driven less by broad market moves and more by company-specific execution.
In pharmaceuticals, AstraZeneca (LSE:AZN) remains a preferred name, with JPMorgan forecasting another year of double-digit core earnings growth supported by existing products and a pipeline that includes several late-stage trial readouts during 2026.
In payments, Adyen is framed as a recovery story. JPMorgan believes the worst of the growth slowdown is behind the company, with easier comparisons and operational investment setting the stage for improved performance. The stock has been placed on Positive Catalyst Watch, reflecting expectations of better-than-feared updates.
On the bearish side, stocks where expectations look stretched remain under scrutiny. UK motor insurer Admiral Group (LSE:ADM) is rated Underweight on valuation and margin sustainability concerns, while Rightmove (LSE:RMV) is also viewed cautiously given its muted growth outlook as investment continues amid a subdued housing market.
A selective outlook for 2026
Overall, JPMorgan’s message heading into 2026 is one of selective optimism. AI adoption and a potential revival in dealmaking provide support for earnings growth, but the bank is clear that not all sectors or stocks will benefit equally.
Instead, analysts are leaning towards companies with visible execution, identifiable catalysts or valuations that fail to reflect the expected trajectory of the business. As markets reopen in the new year, those calls are likely to feature prominently in investor conversations well beyond the holiday period.
