Wall Street strategists busted into 2026 overwhelmingly bullish, with one big caveat: AI had to deliver measurable returns this year.

Why it matters: Two weeks in, investors are getting their wish, as Alphabet is lending its AI horsepower to several companies, while much of its risk is in the rearview.

What they're saying: Having real-world, tangible applications for AI is a "very big deal," Trevor Slaven, global head of asset allocation at Barings, told Axios.

• Slaven thinks the market could rally significantly (again) this year, but there will be volatility along the way.
• Continued questions about an AI bubble could weigh on the tech sector, and mixed policy from Washington could cause broader volatility even if stocks continue to grind higher.

State of play: Alphabet's market cap hit $4 trillion Monday after two major partnerships were announced.

• Apple confirmed it would use Alphabet's large language model, Gemini, to run Siri, and Walmart will use Gemini as part of an AI-powered shopping effort.

Flashback: Alphabet's stock was under pressure throughout early 2025 as investors worried about headwinds ranging from an antitrust case to fierce competition from OpenAI and Anthropic.

• The company's market cap rose by over $230 billion after avoiding a DOJ breakup.
• Since last fall, investors have become more discerning about the winners and losers of the AI buildout, rewarding companies practicing responsible spending that can lead to measurable returns.
• That sentiment shift helped Alphabet become the top-performing Big Tech stock of the year.

Between the lines: Alphabet is showing investors the kind of real-world, measurable AI-application-goodness Wall Street wanted to see this year.

• It's not just about companies using AI for new products that could drive revenue, but also to cut costs.
• Walmart's plan to expand AI-powered drone delivery "sounds like some cost-cutting," Slaven said.
• Companies that can use AI to create tangible returns or to cut costs could be set for rewards from shareholders this year.

Yes, but: AI-adoption allowing for fewer workers seems a "questionable" reason to be bullish, Bob Elliott, chief investment officer at Unlimited Funds, told Axios.

• The question that every AI interview I have with investors these days seems to end with: Will AI create new jobs, or take them all away?
• If AI can replace workers, that's good for investors, who benefit from expanded profit margins and earnings growth, but potentially bad for the economy, if fewer people are working, earning and spending.

The bottom line: There's an underlying acknowledgment from Wall Street that the AI rally is looking bubbly, Jennifer Bender, global chief investment strategist at Jane Street, told Axios.

• But Wall Street doesn't want to hop off the AI train too early, especially right as companies are adopting the technology, potentially boosting their earnings, and profits for investors.

The golden handcuffs are slipping: For the first time since 2020, the share of U.S. homeowners with mortgages set at 6% and higher exceeds borrowers with mortgages below 3%.

Why it matters: It's a sign that the pervasive rate lock that's kept the housing market on ice is loosening — good news for anyone looking to move.

• Still, it's just the lightest of thaws. 80% of mortgage holders still have rates below 6%, according to federal data, analyzed by Realtor.com.
• The average rate on the 30-year mortgage is sitting at 6.16%, according to Freddie Mac's data, and hasn't dipped below 6% since 2022.

Zoom in: The share of homeowners with higher mortgage rates has steadily increased because ... life happens. People need to move, they marry, divorce, retire, downsize, have kids.

• Not everyone can stay in their house and hang on to the ultra-low mortgage rate they nabbed back in the COVID era.

State of play: For the past few years, high home prices and high mortgage rates priced many out of the market. But there are some small green shoots:

• Mortgage rates have been falling. They're well off their highs of 7% in 2023 — and last week, briefly dipped to 5.99% after President Trump said Fannie Mae and Freddie Mac would be buying up more mortgage bonds.
• Home sales are still pretty anemic, but in some regions of the country, there are signs of increased activity.

The big picture: The rate lock switcheroo comes at a time when the president looks desperate to lower home prices.

• Over the past few weeks, he's floated a raft of policy proposals to try to move mortgage rates down and juice demand.
• The administration has even toyed with the idea of "portable mortgages," which would allow mortgage holders to sell their house, and bring their low mortgage-rate along to their new home.
• It's an idea that experts think would be very difficult to implement.

JPMorgan Chase's earnings results included a miss on investment banking revenue and a hit to net income. But CEO Jamie Dimon is still increasing the bank's planned expense growth for 2026 by about $9 billion.

Why it matters: If JPMorgan is spending more, other banks may follow suit, which could fundamentally change the base case for financials this year.

What they're saying: Banks could use JPMorgan's expense increase, "frankly, as an excuse. Because if JPMorgan is doing it, what are we missing? Should we be doing the same," Herman Chan, analyst at Bloomberg Intelligence, told Axios.

• JPMorgan signaled it would guide to 9% expense growth for 2026 at a recent conference, totaling $105 billion.

Threat level: If other banks follow suit and widen their wallets for this year, that could "dent sentiment" across the financial sector, Chan added.

• Wall Street has been bullish on banks given the expectation of looser regulation, an expected pick-up in dealmaking and an economy that continues to hold up.
• Upping spending plans too much could change the value calculation on the banks for their investors.

Zoom in: There's spending that makes you money and spending that you just have to do to operate the business. Investors prefer the former.

• JPMorgan mentioned inflation and health care costs as part of the guide higher.
• But they also signaled that their spending on AI innovation is driving expenses, which could be viewed as a reasonable place to invest.

The bottom line: As goes Jamie, so goes the market.

• We'll be on the Bank of America earnings call this morning to hear about any expected changes to their expenses.