JPMorgan updates stock market outlook for 2026

JPMorgan Chase feels the little guys aren’t done yet.

The country’s largest bank continues to expect retail investors, who powered this year’s record rally, to keep scooping up stocks well into 2026.

In a new client note, JPMorgan’s analysts stated that individual investors have shown “strong momentum” in recent months, throwing nearly $160 billion into stock-based ETFs in both September and October. 

For perspective, that’s the quickest pace of stock inflows since the post-election surge we witnessed late last year. Although hedge funds and pension managers continue to warn of AI bubbles and “frothy” valuations, everyday investors appear to be unconcerned. 

Retail investors are still eyeing the dips and chasing gains, while keeping Wall Street on its heels.

The real question is whether that investment enthusiasm can outlast the caution coming from seasoned veterans.

Retail investors keep the market rally alive

That appetite turned into real money, and a lot of it. 

Month after month, individual investors have continued to pour big bucks into stocks and ETFs, shrugging off any warnings of a bubble. It’s a trend that’s continued to defy Wall Street logic, while pushing the markets to new highs.

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Moreover, JPMorgan notes that December and the first quarter historically run above the average ETF and retail flows, underscoring the bank’s call that momentum could effectively carry into early 2026.

ETF inflows tell the story

Here’s what the flow trackers show:

• Record October: U.S.-listed ETFs pulled in a whopping $175.6 billion, according to FactSet/ETF.com. Morningstar had it at a slightly lower, but still massive, $166 billion.
• September wasn’t too shabby, either: Another $141.2 billion in ETF inflows, per FactSet, represented back-to-back growth that few saw coming.
• The migration is real: By mid-October, ETF inflows topped $1 trillion year to date, on pace for $1.4 trillion for 2025. 
• History rhymes: It sounds all too familiar, with late-2024’s post-election rush, where roughly $140 billion poured into U.S. stock funds after the vote, while ETFs added $161 billion that November alone.

Why Wall Street heavyweights are sitting out

The pros aren’t buying all the retail hype at this point.

For every retail surge, there’s a fund manager or billionaire who’s quietly been moving to the sidelines. 

Here’s what’s driving their caution:

• Bubble fears are back: Bank of America’s October Global Fund Manager Survey found that 54% of managers feel AI stocks are in a bubble, and 60% say equities are overvalued. Earlier this year, they logged the largest-ever reduction in exposure to U.S. stocks, at a net 23% underweight position.
• Valuations don’t help: The S&P 500’s forward P/E hovers in the 22.4–22.9 range, towering over its five-year average (19.9) and 10-year average (18.6).
• Buffett’s sitting on cash: Warren Buffett has been a net seller for multiple quarters, building a record $382 billion cash pile at Berkshire Hathaway. He sold $6.1 billion in Q3 alone.
• Druckenmiller’s trimming, too: The famed trader who’s famous for catching the AI wave early has since sold his Nvidia and Palantir stakes, exiting NVDA in Q3 2024 and wrapping up PLTR sales by early 2025. 
• Boards are treading lightly: Following the massive April tariff-driven selloff and a lightning-fast rebound by June, corporate leaders are factoring in trade and policy risks against the lofty multiples. 

What could keep (or stop) the stock buying spree

If the rally continues grinding higher, it won’t just be vibes; the calendar and policy hopes are lining up behind it. Here’s what could potentially keep the buying spree going (and what could stop it in its tracks).

• Holiday bonuses/tax positioning: Year-end cash and tax moves can attract fresh money into stock markets, a classic driver of the “Santa Claus rally."
• “New Year, new portfolio” psychology: The familiar January tilt, whereby investors reset their allocations while chasing what worked out, and at the same time support early-year flows.
• Early-2026 rate-cut expectations: If markets stick with the view that the Fed eases further into 2026, risk appetite will remain healthy. 
• ETF flow inertia: ETFs saw record intake into year-end, which feeds into a pattern, especially if headlines cooperate.
• Tax-loss harvesting & rebalancing: December selling for tax-related issues or policy-driven rebalances could negatively impact prices.

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