Bank of America (BofA) analysts have highlighted 10 key macro trends expected to shape the global economy and markets in 2026, signaling optimism for US and China growth while cautioning on the potential risks from artificial intelligence (AI) investment.
On a macro level, BofA economists raised their 2026 US GDP growth forecast to 2.4% year-over-year, citing factors such as fiscal stimulus, tax reforms, and continued Fed rate cuts. “The combined effect of stimulus, trade clarity, and ongoing Fed accommodation should help stabilize the labor market around full employment and keep equity markets strong,” analysts wrote.
China is also expected to see stronger growth, boosted by recent policy stimulus and improved trade relations following the Trump-Xi meeting in Korea. “We recently raised our China GDP growth forecast. The policy environment is becoming more supportive,” BofA noted.
Will AI face a bubble?
While AI investment is expected to continue driving GDP and capital expenditure growth, the firm cautions that the US is not yet in an AI bubble. “Our new Bubble Risk Indicator suggests we are yet to see bubble-like instability in the core of US tech,” analysts noted.
The bank also highlighted volatility risks as the economic impact of AI becomes clearer. “Breadth and lofty multiples rhyme with 2000, but recommended stock allocations are much lower, earnings growth is supportive, and speculation in unprofitable stocks is less extreme,” the analysts wrote.
“AI monetization remains to be determined, with power supply a potential bottleneck.”
Other themes shaping 2026
BofA’s report expects muted S&P 500 price returns despite strong earnings growth, a favorable backdrop for emerging markets, flat US long-term interest rates, and stable home prices. Private credit returns may decline to 5.4% in 2026, and copper is expected to perform well due to tight supply and strong demand.
Analysts said investors may favor long bonds in the first half of 2026, noting that lower inflation would support broader economic stability.
Overall, BofA sees a year shaped by cautious optimism. AI investment and capital spending could boost growth, but volatility, regulatory developments, and supply-side constraints in commodities may test markets.
Top 10 trends for 2026
- US GDP growth more bullish than consensus: Boosted by fiscal stimulus, restored tax benefits, and Fed cuts, BofA expects 2026 U.S. GDP growth of 2.4%. “The combined effect of stimulus, trade clarity, and ongoing Fed accommodation should help stabilize the labor market around full employment,” the report said.
- No AI bubble yet: AI investment continues to grow but hasn’t reached bubble-like instability. “Our new Bubble Risk Indicator suggests we are yet to see typical bubble-like instability in the core of U.S. tech,” said Ben Bowler of the Global Equity Derivatives & Strategy team.
- Constructive emerging markets: Lower US dollar, reduced rates, and low oil prices create a favorable environment for EM equities.
- China GDP growth upgraded: Stimulus measures and improved trade relations following the Trump-Xi meeting support stronger growth.
- Muted S&P returns but strong capex: BofA expects 14% earnings growth but only 4–5% S&P 500 price appreciation. Capex is projected to broaden across sectors.
- US needs lower inflation; long bonds favored: Analysts recommend contrarian Treasuries in early 2026 as inflation eases ahead of the new Fed Chair’s tenure.
- Flattish long-term rates and home prices: The 10-year Treasury is expected to finish 2026 around 4–4.25%, with stable home prices and improving turnover.
- Market volatility likely: Uncertainty around AI’s impact on growth, inflation, and capital spending may drive swings. K-shaped recovery patterns and fiscal dominance are additional risk factors.
- Private credit returns likely lower: Total returns for private credit are projected at 5.4%, down from 9% in 2025, favoring high-yield debt.
- Copper expected to perform: Tight supply and strong demand are projected to support copper prices next year.