‘Precarious’ is Wall Street’s defining word for 2026

As we head into 2026, markets are generally pretty bullish. Despite a couple of policy-related hiccups and bubble scares in 2025, the S&P 500, Dow Jones, and Nasdaq all posted healthy returns. And why shouldn’t that continue? Analysts are of the opinion that the good times will continue to roll-not least because of the massive stimulus packet set to land in the One Big Beautiful Bill Act. However, there’s also an understanding among Wall Street analysts that the conditions for success are getting narrower and narrower. For example, much of the market’s optimism this year has derived from the promise of AI despite questions mounting about how and when the bets will pay off. If any news to the spook confidence emerges, it could have an outsized impact on stocks. Likewise, the economy has managed to weather the potential downsides of tariffs, immigration policy, inflation, and employment. So far, employers have managed to find a balance: Reduced business confidence and higher prices, leading to reduced headcounts, have been offset by a shrinking labor market as people have been told to, or have chosen to, leave the U.S. But what if you had to sum all of this up in one word? Well, thanks to the powers of AI, you can. Fortune fed the 2026 outlooks of 15 of Wall Street’s biggest banks into a Perplexity model, and asked it to summarise them all with a single word: It spat out “precarious.” Perplexity’s reasoning will be familiar to many of its human users. It said the documents “acknowledge 2026 as a year of powerful secular trends coupled with structural vulnerabilities . Markets are resilient but fragile, dependent on narrow conditions holding while risks accumulate across geopolitical, monetary, and valuation dimensions.” The AI paradox The most tenuous-one might say precarious-balance for investors to strike in 2026 is the equilibrium between opportunity and hysteria when it comes to AI. In a note titled “Promise and Pressure,” J.P. Morgan Wealth Management’s CEO Kristin Lemkau noted that in 2026 “AI is set to transform industries and investment opportunities, but it also brings the risk of over enthusiasm.” Big Tech has tripled its annual capital investment (capex) spending from $150 billion in 2023 to what could be over $500 billion in 2026, JP notes, and nearly 40% of the S&P 500’s market cap feels the direct influence of either the perceptions or realities related to AI usage. The dotcom bubble remains a warning for many. JPM writes that it has established five barometers to establish similar irrational exuberance . On the first, capacity, the institution notes the industry is comfortably keeping up with demand. The second is the abundance and availability of credit, which the AI trade has, noting: “public markets will be willing to finance the largest tech companies, which all have tighter spreads than the broad investment grade index.” The third is obscuring risk, for example, through lax underwriting or financial standards. The bank noted it is “searching for signs” of such behaviour, and...

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