If Fed eases further, S&P 500 could pass 8,000 in 2026, says JPMorgan's Lakos

Market Outlook - The company is bullish for the next year, suggesting that if the Fed eases further due to improving inflation dynamics, the S&P could exceed 8,000 [2] - The base case for the S&P is set at 7,500, driven by the expectation of one more Fed easing followed by a prolonged pause [3] Economic Conditions - The economy is expected to be in good shape next year, characterized as a K-shaped economy where certain segments are performing well while others are underperforming [4] - Interest rates could alleviate stress in various parts of the economy that are currently struggling [5] Sector Performance - The AI trade is experiencing a pause after a strong performance, but there are signs of broadening out in the market, which may continue tactically into Q1 [6] - Certain consumer sectors, such as low-end consumer goods, cruise lines, and restaurants, have shown recent gains from low levels [8] - Areas like home improvement and housing are expected to see a tactical lift, although this may not lead to robust long-term returns [9] Long-term Trends - The medium-term outlook for 2026 remains focused on AI, with big tech hyperscalers and large banks positioned to benefit significantly [10] - The company expresses interest in sectors like utilities and healthcare, particularly pharmaceuticals, while acknowledging that overall market returns may not be robust [10] Risks - A significant risk to the outlook is the Fed potentially closing the door to future easing sooner than expected, which could negatively impact market performance [10] - The broadening out trade may face challenges if the Fed's actions lead to a return to narrow market leadership [11] - The energy sector is seen as increasingly decoupled from weakening oil prices, which may face downward pressure, along with certain pockets of staples, industrials, and financials outside of banks [11]