Bank of America’s 2026 Market Predictions: AI Boom, GDP Growth, and Asset Class Impacts

This analysis is based on the Benzinga report [1] published on December 3, 2025, detailing Bank of America Global Research’s 2026 market predictions. The forecasts highlight stronger global economic momentum than consensus expectations, driven by three key pillars: sustained AI investment, U.S. fiscal support paired with Fed rate cuts, and China’s stimulus-driven growth.

On the day of the announcement, short-term market reactions reflected varying sentiment across asset classes:

• Semiconductors (SOXX):
  Rose 1.60% to $309.36 [0], directly responding to BofA’s prediction of a continued AI investment cycle, which has already driven the sector up 450% since ChatGPT’s 2022 release [1].
• S&P 500 (VOO):
  Gained 0.48% to $628.80 [0], aligning with projected 14% EPS growth and a 4-5% price upside to 7,100 by 2026.
• Treasury Yields:
  The 10-year yield fell 3 bps to 4.058% [2], nearing BofA’s forecasted 2026 range of 4.0-4.25%, indicating initial market agreement with rate cut expectations.
• Emerging Markets (EEM):
  Held steady (+0.03% to $54.34) [0], reflecting short-term uncertainty despite long-term projections of outperformance driven by a weaker U.S. dollar and lower rates.
• Copper (CPER):
  Increased 0.21% to $33.03 [0], supporting BofA’s outlook on supply constraints and global demand growth.

1. AI Investment as a Cross-Asset Catalyst:
   BofA’s prediction of sustained AI capex (without a bubble) creates linkages across semiconductors, data centers, and tech infrastructure, potentially driving multi-sector growth beyond the short term.
2. Yield Alignment and Market Expectations:
   The 10-year Treasury yield’s proximity to BofA’s 2026 target suggests markets may have already priced in some rate cut expectations, limiting further near-term yield declines unless more dovish signals emerge.
3. Emerging Markets’ Mixed Sentiment:
   The flat performance of EEM on the announcement day underscores market caution about near-term EM challenges, contrasting with BofA’s long-term bullishness driven by external (U.S. policy) and internal (China stimulus) factors.

• AI Valuation Concerns:
  The semiconductor sector’s 450% gain since 2022 raises questions about overvaluation, despite BofA’s dismissal of a bubble [1]. Investors should monitor AI capex growth rates and profitability metrics.
• China Growth Volatility:
  The 4.7% China growth forecast relies on stimulus effectiveness and trade talks; setbacks could impact EM and global commodity markets [1].
• Interest Rate Uncertainty:
  Persistent inflation may delay Fed rate cuts, pushing Treasury yields above BofA’s projections [2].
• Rising Volatility:
  BofA expects increased volatility as AI’s economic impact clarifies; investors should monitor VIX levels and sector rotation patterns.

• Semiconductor and AI Infrastructure:
  Sustained AI capex could drive further gains in SOXX and related stocks, which have already posted 40% YTD growth in 2025 [1].
• Emerging Markets:
  A weaker U.S. dollar and lower rates may attract capital flows, benefiting EEM (30% YTD growth in 2025) [1].
• Copper Sector:
  Supply constraints and global demand growth support CPER’s bullish trajectory, with 35% YTD growth in 2025 [1].

• Bank of America forecasts 2.4% U.S. GDP growth and 4.7% China growth in 2026, both above consensus.
• S&P 500 target: 7,100 (4-5% price upside) with 14% EPS growth; 10-year Treasury yields: 4.0-4.25%.
• Short-term market reactions (Dec 3, 2025): SOXX +1.60%, VOO +0.48%, 10-year yield -3 bps, EEM flat, CPER +0.21%.
• YTD 2025 performance: SOXX +40%, EEM +30%, CPER +35% [1].
• Critical risks include AI valuation concerns, China growth uncertainty, and interest rate volatility.