① Bank of America The bank released an optimistic outlook, predicting that the US and Chinese economies will be stronger than expected in 2026; ② The bank believes that the US stock market may be undergoing a structural shift from "consumption-driven" to "capital expenditure-driven", and that AI infrastructure construction will become an important driving force for the new cycle.
As we approach 2026, the largest bank on Wall Street... One of the banks, Bank of America, released an optimistic outlook, stating that the economy next year will be stronger than most people expect, especially in the United States and China.
In its latest report, Bank of America's global research team cited the bank's earlier December forecast, clearly indicating a more optimistic stance than the prevailing view. Senior U.S. economist Aditya Bhave previously predicted that U.S. GDP growth in the fourth quarter of 2026 would reach 2.4% year-on-year, higher than the consensus forecast of 2%.
Candace Browning, head of global research at Bank of America, summarized this tone, saying that the team "remains bullish on the economy and artificial intelligence. " "And is optimistic about the two most influential economies, expecting GDP growth in the US and China to exceed market expectations."
Of course, the Browning team's optimism doesn't stop at 2026. The bank also projects that the US economic growth rate will remain around 2.2% in 2027, indicating that Bank of America expects a long-term and moderate expansion of the US economy, rather than a short-lived surge.
The bank wrote that recent positive signs in trade negotiations, coupled with the effectiveness of domestic stimulus policies in China, have resulted in economic activity showing greater resilience than previously expected.
Underlying motivation
Bank of America emphasized that this "stronger-than-expected" growth in the United States did not come out of thin air. On the contrary, the bank's economists highlighted a series of favorable policies and investment factors, which they believe will offset the adverse effects of rising prices and a cooling job market.
According to the Browning team, there are five driving forces behind this. :
Fiscal and tax policies: Bank of America estimates that the so-called "Big and Beautiful" bill could increase GDP by about 0.3-0.4 percentage points in fiscal year 2026 by supporting household spending and encouraging business investment, while the benefits of the restored tax cuts and jobs bill will support capital expenditures.
Artificial Intelligence (AI)-Driven Capital Expenditure: The bank believes that AI investment has already contributed to economic growth and will "continue to grow at a robust pace in 2026," starting with data centers . From chips to software, and emphasized that concerns about an AI bubble are "exaggerated."
Most importantly, there are the lagged effects of low interest rates: these will impact the mortgage market, corporate lending, and risk appetite.
Finally, a slight improvement in the trade environment and lower energy prices also provided support for the market, especially for emerging markets and import-dependent economies.
Other Outlook
Regarding the US stock market, Bank of America strategists predict that the S&P 500 will reach 2026... Earnings per share for the S&P 500 constituents are expected to grow by about 14%, but the index itself is projected to rise by only 4% to 5%, with a year-end target price of 7,100 points. This combination of strong earnings and modest index gains suggests that the economy is performing well, but valuations are already high enough that one cannot expect returns to be driven up by significant price-to-earnings ratio expansion.
The team also pointed out that the US stock market may be undergoing a structural shift from "consumption-driven" to "capital expenditure-driven," and AI infrastructure construction will become an important driving force for the new cycle.
Regarding widespread market concerns about an AI bubble, Bank of America points out that AI investment has already begun to make a substantial contribution to US GDP and will continue to grow in 2026. Based on analysis of historical bubble cycles, the US technology sector is currently still in a relatively healthy valuation range and has not shown signs of the speculative overheating typical of bubble periods.
The bank emphasized that AI will remain one of the most critical growth drivers in the coming years.
Regarding interest rates, Bank of America expects the Federal Reserve to cut rates twice in 2026 (in June and July respectively), and anticipates the 10-year Treasury yield to fall to 4% to 4.25% by the end of 2026, with further downside risks. This implies that lending conditions will be slightly looser than in 2024-2025, but will not return to the era of ultra-low interest rates, which fueled the early boom in the US real estate and stock markets.
(Article source: CLS)
