So here’s the thing about Wall Street predictions: they’re about as reliable as your friend who swears they’ll “definitely hit the gym tomorrow.” But every once in a while, someone says something that actually makes you pause your doom-scrolling and think, “Huh, that’s interesting.”
Enter David Kelly, JP Morgan’s chief global strategist, who’s basically the financial equivalent of that friend who calls out everyone’s bad decisions at parties. While most of Wall Street is betting on a “run it hot” economy in 2026 – think high growth, high inflation, basically the economic version of a Red Bull and espresso combo – Kelly’s over here like, “Actually, things are gonna be pretty chill.”
His prediction? By Q4 2026, both GDP growth and inflation will be sitting pretty under 2%. That’s a far cry from the 4.3% growth we saw in Q3 last year and the 2.7% inflation we’re dealing with now.
The Immigration Reality Check
Kelly’s reasoning isn’t some mystical crystal ball nonsense – it’s actually pretty straightforward. Immigration numbers are tanking, and that’s going to mess with both our labor pool and consumer demand. It’s like when your favorite restaurant loses half its staff – things just don’t run the same.
“We’re getting stimulus right now from income tax refunds, we may get some stimulus from tariff rebate checks, but all that’s gonna fade,” Kelly explains. Translation: we’re living off financial sugar highs that won’t last.
The Census Bureau dropped some data showing a “historic decline in net international migration” – basically, way fewer people are moving to the US. Kelly points out that annual immigration is down to just 321,000 people, which means our working-age population is actually shrinking by 20,000 people every month. That’s… not great for an economy that needs people to buy stuff and make stuff.
What This Means for Your Portfolio
Kelly’s advice? Stop being so obsessed with US stocks. I know, I know – it feels weird, like suggesting someone should try a different pizza place when they’ve been going to the same spot for 20 years. But hear him out.
“Ask yourself one question: Where is there an embedded prejudice within markets?” Kelly says. “US investors hate international [stocks].” And you know what? He’s got a point. International stocks have actually been outperforming lately, but they’re still trading at bargain prices compared to US stocks.
His specific recommendations:
- International stocks: Think funds like the Vanguard FTSE All-World ex-US ETF (VEU) or iShares Core MSCI Total International Stock ETF (IXUS). Basically, anything that isn’t just US companies.
- Municipal bonds over corporate credit: Because who doesn’t love tax savings?
- Alternative assets: Real estate, infrastructure, and global transportation. The stuff that doesn’t move in lockstep with your typical stock market drama.
The Bottom Line
Kelly’s essentially saying that while everyone else is preparing for an economic rave, we might actually be heading for more of a coffee shop vibe. And honestly? That might not be such a bad thing. Lower growth and inflation could mean more rate cuts in 2027, which is basically the Fed’s way of saying, “Here, have some cheaper money.”
The key takeaway: don’t put all your eggs in the US basket just because it’s been the cool kid on the block. Sometimes the best opportunities are hiding in the places everyone else is ignoring. It’s like finding an amazing hole-in-the-wall restaurant while everyone else is waiting in line at the trendy spot.
Just remember – this is one guy’s opinion, even if he does work for JP Morgan. But in a world where most financial advice sounds like it was written by robots for robots, Kelly’s take feels refreshingly… human.