BofA's Top 10 Bold Predictions for 2026: AI Boom Continues

 

“AI boom,” “strong global stock market rally,” “Fed rate cuts,” and “trade uncertainty” have undoubtedly been the major keywords dominating 2025. As the year draws to a close, Wall Street investment banks are beginning to release outlooks for the global economy and markets next year.

 

After the stellar performance of U.S. and global markets in 2025, investors are eager to know how much more fuel remains in this rally.

 

Bank of America Global Research recently forecasted in a report that the global economy will enter 2026 with momentum exceeding investor expectations. The bank also predicts stronger growth in the U.S. and China, continued AI-driven investments, and a rotation among market leaders.

 

“Despite lingering market concerns, our team remains bullish on the economy and AI,” said Candace Browning, head of BofA Global Research.

 

She noted that fears of an AI bubble bursting are “overstated” and projected that U.S. and Chinese GDP growth in 2026 will exceed market consensus.

 

Here are Bank of America’s top 10 bold predictions for 2026:

 

1. U.S. GDP growth to exceed market consensus  

   BofA’s outlook for U.S. economic growth in 2026 is more optimistic than the broader market consensus.  

 

   Senior economist Aditya Bhave forecasts 2.4% annualized GDP growth next year, driven by fiscal support from the “Big and Beautiful Act,” reinstatement of incentives from the Tax Cuts and Jobs Act, more favorable trade policies, rebounding corporate investment, and lagged effects from Fed rate cuts.  

 

   In BofA’s view, the current macroeconomic fundamentals are not as weak as many investors believe.

 

2. AI boom will persist, bubble talk unfounded  

   BofA believes the AI investment cycle will continue to expand rather than burst. AI-related capital expenditures — such as in data centers, chips, and automation — have already boosted GDP growth, and this driver will remain strong in 2026.  

 

   Strategists point out that spending on data centers, semiconductor capacity, and automation will stay robust, enhancing productivity and supporting corporate profitability.  

 

   Year-to-date, the iShares Semiconductor ETF is up over 40%; since OpenAI launched ChatGPT in November 2022, it has surged 450%.

 

3. Macro environment improves, emerging markets to benefit  

   With the dollar weakening, falling U.S. rates, and lower oil prices, emerging markets are poised for better performance.  

 

   BofA EM strategist David Hauner noted that these tailwinds will ease EM financing pressures and drive more capital inflows to developing economies in 2026.  

 

   Year-to-date, the iShares MSCI Emerging Markets ETF is up 30%, outperforming the popular Vanguard S&P 500 ETF.

 

4. China’s growth outlook improves  

   Bank of America has raised its growth forecast for China. Chief China economist Helen Qiao also said the recent positive signals from trade talks and gradually effective stimulus measures leave room for upside.

 

5. S&P 500 earnings strong, but stock price gains limited  

   BofA equity analyst Savita Subramanian expects S&P 500 EPS to grow 14% in 2026, but sees limited upside of only 4%–5% for the index itself, with a year-end target of 7,100.  

 

   She believes the market is transitioning from a past consumption-driven cycle to a new one led by capital expenditures, particularly in tech and infrastructure.

 

6. U.S. Treasury yields to fall more than expected  

   Investors may be overestimating how long U.S. Treasury yields will stay elevated. While most see the 10-year yield at 4%–4.5% by end-2026, BofA rates strategist Mark Cabana forecasts 4%–4.25%.  

 

   He expects cuts in December 2025 and June/July 2026, putting sustained downward pressure on yields.

 

7. U.S. home prices stable, with upside risks  

   Led by Chris Flanagan, BofA’s securitized products team predicts U.S. national home prices will be essentially flat in 2026, though transaction volumes will rebound. Regional differences in prices may widen, depending on local supply and affordability.  

 

   With Fed cuts bringing down mortgage rates, the risks for U.S. housing prices lean slightly upward.

 

8. Market volatility to rise as AI impacts become clearer  

   BofA expects market volatility to increase in 2026 as investors gain a clearer picture of how AI reshapes economic fundamentals.  

 

   Reassessing AI’s impact on GDP potential, inflation trajectory, and capex cycles could trigger sharp swings in asset prices.  

 

   BofA also highlights U.S. fiscal policy and K-shaped recovery as additional sources of turbulence.

 

9. Private credit returns to decline  

   After a strong 2025, private credit returns are set to moderate. BofA strategist Neha Khoda expects total returns to fall from ~9% this year to ~5.4% in 2026.  

 

 

   This shift could prompt investors to look toward high-yield bonds or other income assets offering better relative value.

 

10. Copper set for another strong year  

    Despite a 35% gain so far this year, copper prices are poised for further upside in 2026. Persistent supply tightness has supported prices despite weak construction and manufacturing activity.  

 

    BofA metals strategist Michael Widmer forecasts the copper supply crunch will continue, amplified by policy easing and global demand recovery, providing further support for prices.