10 Bold Market Calls For 2026 From Bank Of America: AI Boom, Strong GDP, Lower Yields

Core Viewpoint - Bank of America Global Research anticipates a stronger global economy entering 2026, driven by robust growth in the U.S. and China, ongoing AI investments, and a shift in market leadership [1][2] Economic Growth - U.S. GDP growth is projected at 2.4% for 2026, exceeding consensus, supported by fiscal policies and business investments [3][4] - China's GDP growth is upgraded to 4.7% for 2026, with positive trade developments and stimulus measures contributing to this outlook [8] AI Investment - The AI investment cycle is expected to continue its upward trajectory, with significant capital expenditures in data centers, chips, and automation driving GDP growth [5][6] - Concerns about an AI bubble are deemed overstated by Bank of America [2][5] Emerging Markets - Emerging markets are likely to benefit from a weaker U.S. dollar and lower U.S. interest rates, easing financing pressures and enhancing capital flows [7] Corporate Earnings - S&P 500 earnings per share (EPS) are expected to rise by 14% in 2026, but price gains are projected to be limited to 4%-5% [9] Treasury Yields - Treasury yields may fall more than anticipated, with projections for the 10-year yield to be between 4% and 4.25% due to expected Fed rate cuts [10] Housing Market - National home prices are expected to remain flat in 2026, with potential upside risks due to lower mortgage rates [11] Market Volatility - Increased volatility is anticipated in 2026 as the impact of AI on economic fundamentals becomes clearer [12] Private Credit - Returns on private credit are expected to moderate to about 5.4% in 2026, down from approximately 9% in 2025 [13] Commodity Outlook - Copper prices are projected to remain strong in 2026, supported by tight supply and improved global demand [14]