Bank of America's Top 10 Major Predictions for 2026: Continued AI Boom, Surprising Economic Growth in China and the US

“AI boom,” “global stock market rally,” “Fed rate cuts,” and “trade uncertainty” have undoubtedly been the major keywords throughout this year. As 2025 draws to a close, Wall Street investment banks have begun to release their outlooks for the global economy and markets in the coming year.

After witnessing the stellar performance of the US and global markets in 2025, investors are eager to know how much momentum remains in the current bull run.

Bank of America Global Research recently predicted in a report that the global economy will enter 2026 with stronger-than-expected momentum. The bank also expects stronger economic growth in both the US and China, continued AI-driven investment, and a rotation among market leaders.

“Despite lingering market concerns, our team remains optimistic about the economy and artificial intelligence,” said Candace Browning, head of Bank of America Global Research.

She noted that concerns about an imminent AI bubble burst are “overblown,” and predicts that the US and China’s GDP growth in 2026 will exceed market consensus expectations.

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

1. US GDP growth will exceed market consensus expectations

Bank of America’s outlook for US economic growth in 2026 is more optimistic than the market as a whole.

Senior economist Aditya Bhave forecasts that US annualized GDP growth will reach 2.4% next year. Drivers include fiscal support from the “Big and Beautiful Act,” the restoration of incentives from the “Tax Cuts and Jobs Act,” more favorable trade policies, a rebound in corporate investment, and the lagging effects of Fed rate cuts.

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

2. The AI boom will continue; bubble theory doesn’t hold

BofA believes the AI investment cycle will continue to expand, not burst. AI-related capital expenditures, such as investments in data centers, chips, and automation, have already contributed to GDP growth, and this driver (8.930, -0.19, -2.08%) will remain strong in 2026.

Strategists point out that capital spending around data centers, semiconductor capacity, and automation technologies will remain robust, not only boosting productivity but also supporting corporate profitability.

So far, the iShares Semiconductor ETF has surged over 40% this year; since OpenAI launched ChatGPT in November 2022, the ETF has soared a cumulative 450%.

3. Improving macro environment will benefit emerging markets

Factors such as a weakening US dollar, falling US interest rates, and lower oil prices are expected to improve the performance of emerging markets.

David Hauner, BofA’s emerging markets strategist, points out that this series of favorable factors will ease financing pressures in emerging markets and drive more capital into developing economies in 2026.

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

4. China’s economic growth outlook improves

BofA has upgraded its growth forecast for China’s economy. Chief economist Helen Qiao also said that with positive signals emerging from recent trade talks and the gradual impact of stimulus measures, there is upside potential for the forecast.

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

BofA equity analyst Savita Subramanian expects earnings per share (EPS) for S&P 500 index constituents to grow 14% in 2026, but sees the index’s upside as limited to just 4% to 5%, setting a target of 7,100 points.

She believes the market is shifting from a previously consumption-driven cycle to a new cycle led by capital expenditures, particularly in technology and infrastructure.

6. US Treasury yields may fall more than expected

Investors may be overestimating how long US Treasury yields will stay high. While most expect the 10-year Treasury yield to be between 4% and 4.5% at the end of 2026, BofA rates strategist Mark Cabana expects it to be between 4% and 4.25%.

He anticipates the Fed will cut rates in December 2025 and again in June and July 2026, which will put continued downward pressure on Treasury yields.

7. US home prices to remain stable, but with upside risk

Led by Chris Flanagan, BofA’s securitized products team forecasts that nationwide US home prices will remain largely flat in 2026, though sales volumes are expected to rebound. Regional price differences may widen, depending on local housing supply and affordability.

As Fed rate cuts help lower mortgage rates, the risk to US home prices appears slightly tilted to the upside.

8. As AI’s impact becomes clearer, market volatility will rise

BofA expects market volatility to rise in 2026 as investors gain a clearer understanding of how AI is reshaping economic fundamentals.

A market reassessment of AI’s impact on GDP potential, inflation trends, and corporate capital expenditure cycles could trigger sharp movements in asset prices.

BofA also notes that US fiscal policy and K-shaped recovery will be additional sources of market turbulence.

9. Private credit returns will decline

After a strong performance in 2025, returns in the private credit sector may decline. BofA strategist Neha Khoda expects total private credit returns to fall from about 9% this year to about 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 could see another strong year

Despite rising 35% year-to-date, copper prices could climb further in 2026. Even though construction and manufacturing activity has been sluggish this year, ongoing supply constraints have supported copper prices.

BofA metals strategist Michael Widmer expects the copper supply shortage to continue, and combined with policy easing and a global demand rebound, copper prices will get further support.