Bank of America's Top 10 Major Predictions for 2026: AI Boom Continues, China and US Economies Exceed Expectations

Bank of America predicts that the global economy will enter 2026 with stronger-than-expected momentum, with economic growth in both the US and China becoming even more robust, ongoing expansion of AI investment, a rotation among market leaders, and a positive outlook for emerging markets. This article is sourced from Kechuang Daily and compiled, translated, and written by Deep Tide TechFlow.

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Bank of America has raised its growth forecast for the Chinese economy.

“AI boom,” “strong global equities rally,” “Fed rate cuts,” and “trade uncertainty” have undoubtedly been the key buzzwords throughout this year. As 2025 draws to a close, Wall Street investment banks have begun releasing outlooks for the global economy and markets for the coming year.

After the stellar performance of US and global markets in 2025, investors are eager to know how much more upside this rally has left.

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

“Despite persistent market concerns, our team remains optimistic about the economy and AI,” said Candace Browning, Head of BofA Global Research.

She noted that worries about an imminent AI bubble are “overblown” and predicts that US and Chinese 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 rate will exceed market consensus expectations Bank of America’s outlook for US economic growth in 2026 is more optimistic than the broader market consensus. Senior economist Aditya Bhave forecasts that US annualized GDP growth next year will reach 2.4%. Drivers include fiscal support from the “Big and Beautiful Act,” the return of incentives from the “Tax Cuts and Jobs Act,” more favorable trade policies, a rebound in corporate investment, and the lagged effect 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 in data centers, chips, and automation—are already boosting GDP growth, and this momentum (8.930, -0.19, -2.08%) will remain strong in 2026.

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

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

3. Favorable macro environment, emerging markets will benefit Thanks to a weaker dollar, falling US interest rates, and retreating oil prices, emerging markets are set to improve. BofA emerging markets strategist David Hauner notes that this series of positive factors will ease financing pressures and drive more capital inflows into developing economies in 2026.

So far this year, the iShares MSCI Emerging Markets ETF has risen 30%, outperforming the popular Vanguard S&P 500 ETF.

4. Improved outlook for Chinese economic growth Bank of America has raised its growth forecast for China. Chief economist Helen Qiao also stated that with recent trade negotiations sending positive signals and various stimulus measures gradually taking effect, there is upside potential to her forecasts.

5. Strong S&P 500 earnings, but limited price upside BofA equity analyst Savita Subramanian expects S&P 500 constituent companies’ earnings per share (EPS) to grow 14% in 2026, but believes the index’s upside is limited to 4%-5%, setting a target level at 7,100.

She believes the market is shifting from a previous consumer-driven cycle to a new cycle led by capital expenditure, particularly investment in technology and infrastructure.

6. Potentially larger-than-expected drop in US Treasury yields Investors may be overestimating how long US Treasury yields will stay elevated. While most expect the 10-year Treasury yield to be between 4% and 4.5% at the end of 2026, BofA rate strategist Mark Cabana forecasts it will be in the 4%-4.25% range.

He expects the Fed to cut rates in December 2025 and then again in June and July 2026, which will keep 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 be essentially flat in 2026, but transaction volumes will rebound somewhat. Regional price differences may widen, depending on local housing supply and affordability.

As Fed rate cuts drive down mortgage rates, the risk for US home prices appears slightly tilted to the upside.

8. As AI’s impact becomes clearer, market volatility will increase BofA expects market volatility to rise in 2026 as investors gain a clearer understanding of how AI is reshaping economic fundamentals.

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

BofA also notes that US fiscal policy and a K-shaped recovery will be additional factors causing market turbulence.

9. Private credit returns set to decline After a strong performance in 2025, private credit returns may drop. BofA strategist Neha Khoda expects total returns on private credit to fall from about 9% this year to around 5.4% in 2026.

This shift may prompt investors to turn to high-yield bonds or other income-generating assets offering better relative value.

10. Copper set for another strong year Even after a 35% rise so far this year, copper prices are expected to climb further in 2026. Despite weakness in the construction and manufacturing sectors this year, persistent supply tightness has supported copper prices.

BofA metals strategist Michael Widmer expects the copper supply deficit to persist, and along with policy easing and a global demand rebound, copper prices will receive further support.

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