The festive period is, for some, a time for taking stock of what's happened in the past year - for others, though, its a time to pick stocks for the year ahead.
So it is, then, that it's the season for looking ahead. And, today, we take a look at what JPMorgan’s London-based analysts have laid out as their core views for 2026, pointing to artificial intelligence, a recovery in mergers and acquisitions and a more fertile environment for stock picking as the main forces likely to shape returns.
The American bank’s year-ahead outlook strikes a cautiously constructive tone. More sectors are rated positively than negatively, upgrades outnumber downgrades, and analysts are leaning into companies where earnings momentum or specific catalysts are expected to emerge over the next twelve to eighteen months.
AI remains the dominant cross-sector theme, but the emphasis has shifted. JPMorgan’s analysts argue that the market is moving beyond early-stage hype and towards practical adoption, where AI investment feeds directly into productivity, margins and revenue growth. At the same time, easing financial conditions and strategic pressure are expected to revive corporate dealmaking after a quieter 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 features across almost every sector covered 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 PLC (LSE:LSEG) is highlighted as a beneficiary of this shift.
JPMorgan views the group’s integration of its data and analytics into AI platforms as a potential growth lever that is not yet fully reflected in the share price. The analysts see scope for new distribution channels and product use cases to emerge as customers increasingly interact with financial data through AI-driven tools.
Telecoms equipment is another area where AI infrastructure demand is expected to support earnings. Nokia Corporation (ADR) (NYSE:NOK) is a preferred name within an otherwise challenged sector. JPMorgan points to its exposure to optical networks and IP routing, which are central to handling the growing volumes of 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, JPMorgan’s analysts remain constructive on capital equipment suppliers as the memory cycle turns. They expect capital spending by chipmakers to recover as pricing improves, with ASML Holding NV (NASDAQ:ASML, XETRA:ASME) singled out as the key beneficiary of any upturn in fab investment.
Deal activity to return
Alongside AI, JPMorgan sees improving conditions for mergers and acquisitions in 2026. Balance sheets are stronger than in previous cycles, and management teams are under pressure to deliver growth in a slower macro environment.
While the bank does not base its investment case on speculation, it notes that several sectors could see increased consolidation, including telecoms, mining and parts of industrials. In these areas, scale and cost efficiency are becoming more important, which may favour companies with strong cash generation or differentiated assets.
The analysts also flag that an uptick in deal activity often brings renewed investor interest to sectors that have been overlooked, creating opportunities beyond the immediate transaction headlines.
More positives than negatives
JPMorgan’s sector outlook shows a modest skew towards optimism. Financials, industrials and parts of technology are viewed more favourably, while consumer staples, chemicals and some areas of insurance remain under pressure.
Within European banks, JPMorgan sees value in names where returns on equity are improving but valuations remain low. Barclays PLC (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 Holdings PLC (LSE:RR.) is one of JPMorgan’s preferred UK names, with the bank pointing to continued margin improvement, stronger cash generation and the potential for further capital returns. The analysts expect the group’s self-help measures to remain a key driver of earnings into 2026.
By contrast, chemicals is an area where JPMorgan remains cautious at a sector level. Weak demand, excess capacity and pricing pressure continue to weigh on earnings. BASF is rated Underweight, with JPMorgan’s forecasts sitting below consensus.
However, the bank stresses that even within challenged sectors there are exceptions. Croda International PLC (LSE:CRDA) is highlighted as a top conviction Overweight, supported by its focus on higher-margin specialty ingredients and evidence of more resilient organic growth.
Stock picking comes back into focus
One of the clearest messages from JPMorgan’s 2026 outlook is that dispersion between stocks is likely to remain wide. Analysts expect returns to be driven less by broad market moves and more by company-specific execution.
In pharmaceuticals, AstraZeneca PLC (LSE:AZN, NASDAQ:AZN) remains a preferred name. JPMorgan expects the group to deliver another year of double-digit core earnings growth, supported by existing products and a pipeline that includes several late-stage trial read-outs during 2026.
In payments, Adyen NV (NASDAQ:ADYYF, OTC:ADYYF, XETRA:1N8) is positioned as a recovery story. JPMorgan believes the worst of the company’s growth slowdown is behind it, 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, JPMorgan continues to flag stocks where expectations look stretched. UK motor insurer Admiral Group Plc (LSE:ADM) is rated Underweight, with concerns around valuation and margin sustainability.
Rightmove PLC (LSE:RMV) is another name where the bank remains cautious, citing a muted growth outlook as the company continues to invest while the housing market remains subdued.
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 into companies where there is visibility on execution, identifiable catalysts or valuations that do not reflect the expected trajectory of the business. As markets reopen in the new year, those calls are likely to form a key part of investor conversations well beyond the holiday period.