Jamie Dimon’s economic outlook reeks: After flagging “cockroaches” in the system last year, he’s now warning about a skunk.

In his annual letter to shareholders, Dimon laid out a growing list of risks facing the US economy, comparing them to “tectonic plates, always moving and periodically causing earthquakes and volcanoes when they crash into each other.” Among his biggest concerns:

• Geopolitical uncertainty: Conflicts in Ukraine and Iran are fueling volatility in energy markets, with knock-on effects across critical commodities like helium and fertilizer, further disrupting global supply chains.
• Rising debt levels: Global deficits are at “extreme” highs. “The right way would be to deal with it now before it becomes a problem,” he warned. “The wrong way would be to let it become a crisis, which, in my opinion, is probably the likely outcome.”
• Private credit: The $1.8 trillion private credit market is small relative to the $13 trillion bond market and thus does not pose a systemic risk, but weakening standards and poor transparency could drive higher-than-expected losses when the credit cycle turns, especially if interest rates rise.

Not everything stinks

But enough with the doom and gloom. Dimon also highlighted some meaningful tailwinds:

• US resilience: The economy is far less energy-dependent today, with energy use per unit of GDP down to roughly 40% of the usage seen 45 years ago.
• Fiscal boost: The “big beautiful bill” could inject roughly $300 billion (1% of GDP) into the economy.
• Liquidity support: The Fed is purchasing about $40 billion in securities each month. While that’s set to taper to $20 to $25 billion this month, it still helps prevent a liquidity squeeze in the system.
• Deregulation: Looser regulations are freeing up capital and boosting confidence, with spillover effects across sectors from banking to energy to housing.
• AI spending boom: Hyperscaler capex surged from $450 billion in 2025 to $725 billion in 2026—likely inflationary in the short-term, but a long-term driver of productivity gains.

A smell-test for markets

Despite the hints of optimism, the big picture still looks uncertain even to Jamie Dimon’s well-trained nose. But the real wildcard he’s watching right now is inflation.

“The skunk at the party—and it could happen in 2026—would be inflation slowly going up, as opposed to slowly going down,” Dimon noted. “This alone could cause interest rates to rise and asset prices to drop. Interest rates are like gravity to almost all asset prices. And falling asset prices at one point can change sentiment rapidly and cause a flight to cash.”

From cockroaches to skunks, it probably won’t be long before a few more critters follow—Dimon’s a notoriously pessimistic investor, and not all of his warnings over the years have been accurate. Let’s just hope the next animal he chooses for a metaphor is a little easier to stomach.—SY

🟢 What’s up

• AMC surged 12.5% after posting record Easter weekend revenue, fueled by strong turnout for The Super Mario Galaxy Movie.
• Kratos Defense & Security Solutions jumped 10.07% as Jefferies upgraded the stock to Buy, citing accelerating demand for drones and missile systems.
• Soleno Therapeutics rallied 32.31% on news it will be acquired by Neurocrine Biosciences in a $2.9 billion deal.
• Paramount Skydance gained 3.47% after it secured roughly $24 billion in sovereign wealth backing for its planned takeover of Warner Bros. Discovery.
• Seagate and Western Digital climbed 5.58% and 3.11%, respectively, after Morgan Stanley highlighted both as overlooked beneficiaries of AI-driven data demand.
• AppLovin moved 6.81% higher after Wells Fargo raised its price target, pointing to nearly 70% revenue growth over the past year.

What’s down

• Tesla slid 2.15% after JPMorgan warned the stock could drop as much as 60% amid mounting concerns about its financial outlook.
• Invesco edged 5.22% lower with pressure building after BlackRock filed to launch a competing product, challenging Invesco’s flagship QQQ Trust.
• Lucid Group fell 6.33% after missing first-quarter delivery expectations due to a recall and temporary sales halt.
• Viridian Therapeutics dropped 26.22% as Amgen’s rival thyroid eye disease drug delivered strong Phase 3 results, raising competitive concerns.

In a market as volatile as this one, the safety of value stocks is mighty tempting—at least, for now.

The first quarter was marked by geopolitical upheaval and a slowing AI trade, both of which pushed investors toward value stocks. Value stocks are usually more mature companies with lower price tags than their riskier growth-focused counterparts—think banks, industrials, and energy companies. The latter group has had a spectacular 2026, with the energy sector climbing 41% YTD thanks to rising oil prices, leading the S&P 500.

The result is that value is crushing growth: The Wall Street Journal reported yesterday that the Russell 1000 Value Index is up 2.4% in 2026, compared to the Russell 1000 Growth Index, which has plunged 9.1%, marking value’s largest outperformance of growth since 2022. The craziest part is that, despite their hot streak, value stocks are still far cheaper than growth stocks.

That may make it enticing to bet big on value, but be warned: the good times may not last forever. On the one hand, peace in the Middle East could cause oil prices to plunge, and energy’s massive gains may evaporate. On the other hand, earnings expectations for tech stocks remain robust, and high-growth companies could reclaim their crown as earnings season kicks off next week.

But for now, value stocks are an invaluable part of a well-balanced portfolio.—MR

For being a core member of the Mag 7, Microsoft isn’t looking like such a magnificent investment this year.

In the first quarter of the year, Microsoft shares sank 23%—its worst quarter since 2008—and the stock hasn’t budged since. Microsoft’s underperformance comes as the broader Mag 7 club has had a tough start to the year: Overall, the Mag 7 as a group are down over 12%, compared to the S&P 500’s decline of just 3.41%.

The problem, of course, is AI. Goldman Sachs analyst Gabriela Borges laid out the key reasons for Microsoft’s underperformance this year in a research note today:

• Microsoft, like its big tech peers, is splashing out a hefty amount on capex to build out data centers and other AI infrastructure—but in turn, investors expected to see far faster growth in its cloud platform Azure, which hasn’t panned out yet.
• Shareholders have been concerned that other AI tools like ChatGPT and Claude could take market share from Microsoft Office 365 tools like Word and Excel.
• To top it all off, many people aren’t confident Microsoft’s Copilot is as good as other generative AI competitors.

Opening Windows of opportunity

As you already know if you’ve been paying attention, the AI race is a marathon, not a sprint. While it’s lagging the rest of the pack today, Microsoft could be a winner in the long run, according to Goldman Sachs.

“For the stock to begin outperforming we believe two dynamics will be key: a) supply normalizing such that Azure can beat and raise even while Microsoft makes internal investments; b) Copilot datapoints and monetization improving to neutralize the disintermediation bear case,” explained Borges.

That’s all easier said than done, which is why Borges’ short term outlook is more mixed—she notes that Azure doesn’t have the capacity to fully meet demand yet, and data center spending will keep ramping up before investors start to see returns on that investment. But Borges believes that Microsoft will make a major comeback—in fact, the analyst has a Buy rating on Microsoft and a one-year price target of $600, 61% higher than where shares trade today.

To hit that lofty goal, Microsoft will need to increase its AI tab over the next few years. While it’s expected to spend over $108 billion this year, Borges predicts that its capex could reach as high as $200 billion in 2027, and $241 billion in 2028.

On the bright side, Borges argued that fears about Microsoft Office losing steam are already reflected in the stock, and that Copilot will improve with new AI upgrades. She believes that Microsoft actually has an advantage in the AI game, given its tools are already integrated into workplaces everywhere, and people are familiar with the classics like Excel, Word, and PowerPoint.

Then again, if we never saw an Excel spreadsheet for the rest of our lives, you wouldn’t hear us complain.—LB

• There’s just one tiny problem with using AI as your financial advisor, according to an MIT professor: It doesn’t actually have fiduciary duty to clients.
• Amazon plans to add a 3.5% fuel and logistics surcharge for third-party sellers, thanks to spiking energy prices.
• BNY and Robinhood are going to help run the new Trump accounts for children.
• Corporate insiders are buying stock, a bullish sign for the market.
• Prediction market Kalshi just scored a big win in New Jersey.
• European nations and American brands are battling over what US companies can name their cheese.
• As companies get taken private, they need to be replaced on market indexes. These are the 14 stocks that could be added to the S&P 500 as soon as this evening.

Economic reports: The only thing on the menu tomorrow is the durable goods orders for February from the Census Bureau. We’ll also hear from Chicago Fed President Austan Goolsbee and Fed Vice Chair Philip Jefferson.

Earnings announcements: The company we’re watching tomorrow is denim purveyor Levi Strauss, which has managed to pull off an impressive balancing act: raising prices to offset tariffs without ticking off its customers.