BofA Global Research Podcasts

Stablecoins offer opportunities and pose risks Potential for increased adoption of stablecoins and implications for the banking sector has become a hot topic among investors given the push among policymakers. Eventually, consumers might be able to buy dollar-linked stablecoins and potentially earn interest on these assets, meaning more competition for bank deposits. There are regulatory hurdles that first need to be cleared but Congress is currently considering a few proposals that could bring this closer to reality. While the use case beyond cross-border payments seem limited at the moment, the potential for non-banks (Big Tech / Big Retails) to come up with creative solutions to induce adoption poses risks. That said, potential for banks to issue a stablecoin once the regulatory framework is in place could mitigate risks, Ebrahim Poonawala discusses these issues as we delve into stablecoins, the areas where they could be particularly helpful to consumers and how, if adoption winds up being significant, they could impact everything from US Treasury demand to loan funding, to payment fees.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2025 Bank of America Corporation. All rights reserved.

Long end of Tsy curve faces supply/demand imbalance As tariff fears have moved to the background, a different economic concern has moved to the foreground-growing fiscal deficits and the impact on interest rates. Public debt-to-GDP stood at 98% last year and is set to rise further. We discuss why deficits have captured the market's attention today and whether growth aspects of the budget plan could be offset by the higher interest rates. While the boost to growth isn't large, certain groups should see benefits. This includes senior citizens, also business investment may benefit later in the year, especially if tariff uncertainty has peaked. The US Rate Strategy team believes that a mismatch of demand and supply of Treasuries at the long end of the curve could lead to more cheapening of Treasuries, meaning that the 30Y yield could move further above swap rates. In theory, the recent Moody's downgrade of the US' credit rating could lead Congress to a more balanced budget and but on that, our guests were skeptical.   As tariff fears have moved to the background, a different economic concern has moved to the foreground-growing fiscal deficits and the impact on interest rates. Public debt-to-GDP stood at 98% last year and is set to rise further. We discuss why deficits have captured the market's attention today and whether growth aspects of the budget plan could be offset by the higher interest rates. While the boost to growth isn't large, certain groups should see benefits. This includes senior citizens, also business investment may benefit later in the year, especially if tariff uncertainty has peaked. The US Rate Strategy team believes that a mismatch of demand and supply of Treasuries at the long end of the curve could lead to more cheapening of Treasuries, meaning that the 30Y yield could move further above swap rates. In theory, the recent Moody's downgrade of the US' credit rating could lead Congress to a more balanced budget and but on that, our guests were skeptical.

Smart glasses may weigh on phone sales, lift Internet use Smart glasses could be the next big opportunity in personal technology. Leading tech companies are focused on the form factor and functionality like augmented reality and 4K video may follow today's applications, which include AI assistants, music playback, phone calls and hands-free texting. Ultimately, these devices could stretch out the smart phone replacement cycle, like phones have managed to stretch the replacement cycle for laptops. In the 2030s, we could even see a world where smart glasses are the default personal device. But while there could be big changes ahead, that doesn't mean that hardware and software incumbents are about to be disrupted. Wamsi Mohan discusses why he believes incumbents have a major advantage in smart glasses and much of it comes down to control of the ecosystem. There's risk for incumbent Internet companies too but many of them have proven adept at adjusting business models in the past and the new form factor could even enhance business models as Internet use rises further.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2025 Bank of America Corporation. All rights reserved.

USD overweight exposure is now normalizing Even as equities have rallied substantially from April lows, recovery in the dollar index, or DXY, has underwhelmed and the currency sits near the lowest level it's been in three years. Alex Cohen believes that while there are cyclical reasons for the dollar weakness, there's also been a bigger structural rethink on the currency by investors from the push toward de-globalization and from questions around US exceptionalism. Alex sees German fiscal reforms as a game changer, another dollar negative. But our own survey shows very negative sentiment for the dollar, which is relevant to the short term. Mark Cabana contributes with a discussion of rates given the important interplay between the Treasuries and currencies. Mark believes that there has been a shift away from US Treasuries by global investors, although a lot of this recent shift is a function of investors reducing their overweight position rather than getting outright negative. Mark also discusses debt sustainability concerns and how budget negotiations may impact bonds going forward. You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2025 Bank of America Corporation. All rights reserved.  

Looming tariffs lead to renewed focus on transfer pricing Multinational companies have used transfer pricing as a way to reduce tax bills. Transferring a product from a lower tax jurisdiction allows profits to be taxed at the lower corporate rate, so a higher price can mean greater tax savings. But tariffs would be based on the higher price, meaning that some of the same companies using this practice to lower tax bills will also face higher levies. Travis Steed discusses what this means for medtech, the impact transfer pricing has had on tax rates, whether practices could change under a tariff regime and why the group is still a compelling, defensive investment   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2025 Bank of America Corporation. All rights reserved.

Budget conscious consumers indulge in healthier foods There's been a shift in snacking towards healthier options and away from some of the convenience store classics. A stretched consumer seeking value for their dollar seems to be allocating spend to cleaner alternatives. These often contain more protein and less of what's perceived as harmful. Rising GLP-1 (glucagon-like peptide-1) usage may be a minor contributor to these shifts too, though it's likely that more of this impact is ahead of us as penetration of these drugs rises and oral options arrive. Outside of food, alcohol consumption has fallen, creating structural headwinds industries like beer. Pete Galbo discusses trends and what these shifts mean for his coverage. Mike Dick, Consumer Sector Specialist, who is not a member of the research department, joins in to ask a few questions. You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2025 Bank of America Corporation. All rights reserved.

Euro defense spend benefits US contractors near-term European plans to spend more on defense as a percentage of GDP were hatched in the immediate aftermath of the Ukraine invasion. More recently, the German Parliament agreed to reforms that allow for even more spending on defense. But for a number of reasons, Europe would like to keep more of this spending within the Euro Area. Ron Epstein and Ben Heelan discuss what Europe may be able to procure internally and what they'll be buying from US contractors. And if the US is spending less on defending Europe, Ron addresses where spending priorities may shift, especially as the US may be less focused on preparing for a land war. Ron also tackles the question of whether Europe may be encouraged to buy more defense gear in exchange for lower tariffs.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2025 Bank of America Corporation. All rights reserved.  

Dubai is embracing tech, should investors embrace AI? Our Global Investment Summit in Dubai offered attendees some perspective on what Dubai and the UAE are doing to advance AI. Panels also offered a look at how the technology is being used beyond the borders of the UAE and threats it brings. Sonali Thiesen, Global Head of FICC e-Trading and Markets Strategic Investments and Haim Israel were panelists at the Summit. Haim discusses the critical role that cybersecurity will play as AI evolves. He shares feedback and key ideas from his "World in 2030" note and addresses recent weakness in AI equities. Sonali discusses the continued shift to electronification in the fixed income markets, how machine learning continues to play a growing role in those markets and how Gen AI and blockchain have the potential to generate additional efficiencies.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2025 Bank of America Corporation. All rights reserved.

An interesting time to explore other shores We recently hosted a two-day Global Investor Summit in Dubai. Panels as well as formal and informal discussions touched on everything from the investment merits of Dubai and the Gulf Cooperation Council (GCC) to US policy to evolving views on non-US markets. Michael Hartnett discusses his latest views on international markets and how investors are reacting to uninspired price action from US stocks. With so many investors coming in to 2025 with a US exceptionalism portfolio, US policy risk has them reassessing regional positioning. But risks for non-US markets aren't absent either and Michael discusses his preference for international even amidst tariff risks.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2025 Bank of America Corporation. All rights reserved.

Improved SMB macro positive for software but risks exist Small businesses have faced challenges, from higher costs to difficult hiring to higher rates and mixed demand. The Bank of America Institute examines the bank's proprietary data to better understand the US economy. Based on data through February, the Institute found that for the first time in three years, deposit growth among small clients surpassed balance growth, a sign of improved profitability. Taylor Bowley from the Institute discusses what's driving that improvement but cautions that tariffs and other risks are important to watch. Brad Sills discusses how small business makes up the majority of revenues for several software companies, so the health of these businesses is critical. Sluggishness in small business profitability over the last several years means that improvements, should they persist, could boost growth for these companies. Brad also discusses why software companies catering to small businesses have certain advantages that companies with larger customers do not.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2025 Bank of America Corporation. All rights reserved.

Tariff fears, years of US optimism create opening for EM David Hauner has been bullish on emerging markets since the US Presidential inauguration, and that view has gotten more attention with performance of markets so far this year. Investors have been seeking out markets outside of the US and recent US policy uncertainty is one of the many factors causing this shift. David points to improvements in China and Europe, the inability for the dollar to rally further, off-sides positioning in EM, especially relative to the US, and still some positive catalysts ahead. He discusses markets where he still sees risks from tariffs as well as those where he believes investors may benefit from having exposure today. Hear why David believes that for EM in 2025, "things are really looking up".   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2025 Bank of America Corporation. All rights reserved.

Reconstruction should boost demand for certain metals An end to the Russia-Ukraine conflict would have an impact beyond the most important, which is ending the bloodshed. Russian natural gas could start to flow through Ukraine and into Europe once again, pushing Europe gas prices significantly lower, positively impacting European industry and dampening inflation. Oil supplies would be impacted as well and Francisco Blanch discusses how OPEC might react to in case Russia increases oil flows to the West. The supply of certain mined commodities, especially uranium and graphite, could rise as the US looks to secure access to these critical metals. And then there's the demand for metals that could come from the rebuilding of Ukraine. It's estimated 10% of Ukraine housing and 75% of electrical transmission capacity are casualties of the war. Michael Widmer discusses how demand growth for copper should see a significant uplift from Ukraine reconstruction.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2025 Bank of America Corporation. All rights reserved.

Yes, there is a compelling case for stocks outside the US Investors have record exposure to US stocks according to the latest Global Fund Manager Survey. The US dollar, in real effective terms, is at all-time highs by some measures. Several of our strategists believe international equities can begin to outperform and that the US dollar could peak. US policy could help, and the Global Investment Strategy team expects a softening of America First policy and reigned-in US inflation to be supportive of some non-US markets. We discuss which international markets and currencies look most compelling and the good news we expect out of regions where positives have been scarce. Plus, we address why another contrarian trade, owning longer duration bonds, could also perform well.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2025 Bank of America Corporation. All rights reserved.

Productivity consistent with higher for longer rates The Global Economics Team is optimistic on US growth in 2025 and Aditya Bhave discusses the cyclical and structural forces supporting this outlook. The US disinflation story has stalled for now and the team expects inflation to end in 2025 at around the same levels where it finished 2024. That view incorporates some impact from new tariffs but we discuss why the tariff impact on personal consumption expenditure inflation (PCE) should be just a few tenths of a percent over time. Productivity improvements in the US are one of the reasons for the sanguine view and the team discusses why productivity is mostly a US story and why improved efficiency is also consistent with higher for longer interest rates. But while the US should continue to standout, especially among developed markets, there are a number of compelling economic growth stories, ranging from Japan to India to Mexico and Argentina, provided the latter two manage some of the current challenges properly.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2025 Bank of America Corporation. All rights reserved.

Federal subsidies not the only factor enabling solar There is investor concern that federal subsidies for some renewable energy programs, from residential solar to utility wind, will shrink under the Trump administration. And those concerns have some validity, but according to Dimple Gosai, even with a possible decline in federal help, there are a number of positives that should persist for parts of the clean energy industry. Among the positives are state and local subsidies as well as system costs that continue to come down. Especially if power prices rise, the economics of renewables should look better, and in many cases, unsubsidized utility scale solar is already competitive with natural gas. Tariffs could increase system costs but benefit certain domestic producers. Dimple discusses why she continues to expect growth for certain renewables, the importance of storage in enabling this growth, and why geothermal may be underestimated as an energy solution.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

Disruption of linear TV a boon for programmatic Connected TV, or CTV, which refers to everything from movies watched via apps on television to apps offering live TV and traditional DVR capabilities via the Internet, has seen a surge in share of ad spend. This is especially true as more of this connected programming is offered via ad-supported tiers. Programmatic can also bring in more advertisers by making it easier for small and medium sized businesses to buy ad space. AI can drive growth too, allowing businesses to make more effective ad decisions and even helping with campaign content. Jessica Reif Ehrlich also discusses how more targeted CTV ads lead to growth in the format and how there's room for share gains in audio too.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

Not all forces are aligned to push rates higher Though the possibility of tariffs and immigration reform, in combination with pro-growth policies, would seem to bias interest rates higher, the 10Y yield is up fairly modestly since election results were announced. And while Mark Cabana expects the 10Y yield to trade in a higher range than it did previously, Mark and the team don't expect 10Y yields to run to 5% and beyond. Mark joins us to discuss the forces that could push rates higher and those that could weigh them down. He discusses Fed path implications for the 10Y and how the rate components have changed since the election. Mark also discusses how US policies could spill over to rate markets globally and what that means for Treasury demand.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.  

Strong backdrop for gold but sharp rally suggests a pause Gold has had an incredible rally this year, appreciating more than the S&P 500 or NASDAQ. Global central banks have bought at the fastest pace in history, and making gold the second largest reserve asset behind the US dollar. Jared Woodard believes there may be a buyable dip in the months to come and explains why. As for gold equities, they have materially outperformed the gold price of late and Lawson Winder says the time to own gold miners is during bull markets for gold but longer term, the stocks have clearly underperformed the metal. Electrification is more an important driver for gold than silver as it's a better conductor than copper. Lawson discusses this and why the electrification push remains a good investment theme.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

HY issuance recovers but net new credit largely absent Spreads in the US high yield market are near the tightest levels ever, providing a constructive read on the US economy. Tight spreads and lower rates have led to a pickup in HY issuance, which recently approached more normal levels, but that has since slowed as rates moved up. And much of the issuance seen has been used for refinancing. The positive is that there could be another leg for issuance as companies sell debt to finance capex or acquisitions. This is the Fed transmission mechanism at work. Oleg discusses the impediments to such a shift and the implications of getting the election behind us. We also discuss private credit, how rapid growth in that market impacts high yield and where Oleg sees the best opportunities.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

Insurance costs should continue to rise in high risk areas Insurance is in the news again following two damaging storms. Sadly, for many homeowners, much of the damage won't likely be covered by insurance given that it's flood-related and nationally, only about 4% of homeowners have flood coverage. Some homeowners will choose to add flood, adding to the cost of homeownership, but especially in Florida, there was wind damage too. This damage was inflicted on a FL insurance market where 15-20% of policies are written by Citizens Insurance, controlled by the state. Josh Shanker believes that Citizens has underpriced policies and as FL looks to shift these policies to the private market, insurance premiums should rise, adding to what are already the highest insurance premiums in the country. Josh also discusses strides made by the state of FL in reducing fraud in the state's insurance market, the impact that could have on pricing and the latest outlook for auto insurance where he's been bullish on pricing for several years.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.  

Corporate transformation, AI could drive Japan equities Last month, BofA Global Research hosted its annual Japan conference. Over 500 investors joined, and attendance was up 2% versus the prior year. Japan equities rallied sharply through July, but then a rate hike from the BoJ and a stronger Yen disrupted the upward momentum. Daisuke Takato suggests there was more evidence of positive change at the conference. He reiterates Japan Equity Strategist Masashi Akutsu view that 2025 will be another leg higher in Japan's equity story as inflation helps drive higher wages, efficiencies and corporate transformation. Semiconductors could help Japan equity returns as Mikio Hirakawa believes Japan's semicap test equipment have and will benefit from AI-related demand for GPUs and memory.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

Demanding investment in the grid and generation US electricity demand growth in 2024 has run at a faster pace than GDP. This follows a decade in which demand hardly grew. And while data centers are an important driver of this recent growth, there are other, more important factors, namely building electrification. Reshoring and electric vehicles have also been a boost. The point is that the factors behind this growth are many, meaning that a slowdown in one area isn't likely to derail what should be years of increasing power needs. Our analysts discuss the challenges that nuclear faces in meeting US demand needs, the role of natural gas and the capital equipment that will be needed for both the grid and data centers. We also discuss the importance of renewables and how limitations keep them from being an around-the-clock baseload power solution anytime soon. Renewables do raise grid complexity and power price volatility, a benefit for the companies offering solutions.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

A ready-mix of positives for real estate Last month, BofA hosted its annual Global Real Estate conference with record client attendance. Jeff Spector suggests that while investors have been underweight real estate the last couple of years as rates rose, recent outperformance is beginning to draw investors into the group. The fall in rates make REIT yields look more attractive, all else equal, and also come with a number of fundamental positives which we discuss within. REIT executives at the conference see the market for real estate transactions picking up, historically a positive for REIT valuations. And office, aside from being a particular beneficiary of rate cuts, received some positive commentary from real estate executives. Return to office mandates are leading to improvement in certain key US markets including Midtown Manhattan, which is presently one of the strongest office markets in the country. Also, high rates and pessimism on the part of developers in areas including office and retail has meant supply is muted.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.  

Lower rates will drive home turnover and housing stocks Mortgage rates have dropped by more than 100bps since last fall and housing stocks have responded. But while lower rates should in theory be good for demand, signs of improvement are modest so far. Many buyers remain on the sidelines as they await a further drop in rates. On the supply side, the new rate regime should reduce lock-in and allow more existing homes to come to market. This might seem to balance the increased demand, but Rafe Jadrosich also points out that home sellers usually become buyers. Plus, lower rates could drive the many high-income renters into the housing market. A pickup in transactions and housing turnover should benefit building products stocks from a cyclical standpoint. And some of these products also benefit from secular tailwinds.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

Construction spend strong on structural tailwinds Construction spending, excluding housing, is running at a rate of about $1-$1.2 billion annually, near record levels. Much of this spend is driven by recently passed legislative acts, according to Mike Feniger. But reshoring and AI are also having significant positive impact and the annualized capex for big tech has increased from $138 billion to $229 billion in just a year. Still, despite the headline strength, there are areas of construction which are weak, including warehouses, retail shopping centers and private office. The number of mega projects is slowing. Rate cuts and election certainty could be a catalyst for some of these lagging areas. Typically, housing benefits from rate cuts first and commercial construction sees a boost 1-2 years later but a lack of overcapacity in commercial construction could mean that there's less of a lag this time. Mike believes that large equipment rental companies are likely to benefit from this improvement, a view he discusses within. You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

GenAI: Coming Soon to a Sector Near You Alkesh Shah views Generative AI (GenAI) as the beginning of the third major tech cycle of the past 50 years. Over the past 10 years, development of more powerful chips and a new neural network architecture has raised the upper bounds of storage and computation exponentially, consequently reducing the time and cost to train increasingly large models powering apps like ChatGPT. Alkesh expects GenAI to catalyze a revolution in corporate efficiency and productivity that will occur far more rapidly than past disruptive technologies, which investors anticipate. Alkesh surveyed 157 equity analysts and macro strategists on AI's financial and economic disruption. Survey responses indicate that enterprise AI implementation could boost S&P operating margins by 200bps over the next five years. AI beneficiaries will likely expand from Semis and Cloud Service Providers in the first wave; Tech Hardware, Software and Capital Goods in the second wave; and ultimately touch every sector globally.    You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

Labor market remains key to consumption Discretionary services grew unusually quickly as the economy reopened and savings buffers were high. In 2023, spending received another boost in the form of the Social Security cost of living adjustment, which contributed to rapid 4% GDP growth in the second half of the year. But now, things are slowing to a more normal, trend-like pace of 2%. And there's evidence to suggest that after outsized strength, spend on travel and other services is easing too. One of the positives that comes with this change is that it better balances supply and demand and slowing inflation can help boost real incomes. Another potential positive is that the Fed is close to cutting rates, and while it may take some time for that to help housing markets, Aditya sees benefits for other parts of the economy and for certain consumer segments. Labor markets are key to the outlook, but the recent loosening in these markets has more to do with slower hiring than with layoffs. You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.  

A weakening relationship between nat gas and temps In the US, natural gas has struggled for nearly two years to cope with a storage surplus. Meanwhile, solar power generation has jumped to new highs. These are among the reasons that natural gas prices have languished despite growth in US electricity demand. And growth in solar capacity has weakened the formerly positive relationship between summer temps and gas prices. Francisco Blanch believes US power demand growth should continue into 2030, driven by data centers, electric vehicles, the transition to renewable energy, manufacturing and other areas. But while power demand growth should remain compelling, supply dynamics mean that the case for power and commodity price gains is less clear. Additionally, US election outcomes could impact much of the aforementioned. Meanwhile, Europe has seen power demand contract as industrial usage has declined while the Euro area also witnesses growth in solar and wind generation.  You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.  

Value in Vegas has kept consumer demand resilient The number of people traveling by air in the US continues to make records, but some airlines have posted disappointing results. That's because pricing has been weak as airline capacity has grown faster than demand. Andrew Didora does expect that airline capacity growth will slow after the summer, easing these pressures. But while demand for airline seats continues to make new highs, there are a number of areas that are undergoing normalization, especially very high-priced and very low-priced hotels as well as certain geographies including coastal Florida and pockets of California. Pricing for mid-priced hotels remains fairly strong, though. And demand for Las Vegas hotels and for cruises has remained resilient, likely because both offer compelling value for the consumer. With Vegas, entertainment options continue to broaden just as other cities in the West have faced various challenges. We'll discuss these post-COVID realities for travel and also address implications of rate cuts.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

Slam dunk for streaming media in acquiring NBA rights Earlier this month, Head of US Media and Entertainment Research Jessica Reif Ehrlich hosted her annual Media in Montauk conference. As is typical, discussions at the conference were most focused on long-term trends and strategy. Women's sports got a lot of focus, especially as the WNBA has seen rising ratings and interest. Year-round offerings are particularly important for streaming networks looking to combat churn and the scheduling of the WNBA helps, given that the season starts when the NBA is coming to an end. Jessica believes cable is becoming less important to media companies as streaming becomes more critical. The oldest form of video, broadcast, remains key because of its wide reach. Jessica suggests box office receipts should pick up in the back half of '24 and normalize by '25 as the impact of strikes wanes. There are mixed signals in travel and entertainment demand, with small cracks in concert demand but there's a new park scheduled to open next year in Orlando and that should drive traffic. Targeted ads on streaming services remain a big opportunity.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

Job gains will slow but healthcare has room to run The labor market has remained robust, adding an average of about 250k jobs monthly since the start of the year. But services jobs account for the bulk of the recent growth and at this point, demand in many parts of the service economy have fully recovered. Additionally, structural changes and shifts toward automation accelerated amidst the difficult hiring backdrop. Michael Gapen addresses questions about how much growth is left in services jobs, he explains what could account for the somewhat different messages being sent by the two government employment surveys and addresses the fading boost from fiscal policy. The US Economics team believes that job gains will slow but they're not expecting a sharp decline, partly because certain job categories like healthcare still have room to add employees.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.  

Volume picture better for restaurants than packaged food Food companies are seeing negative volumes, both in their grocery businesses and their food service businesses. The volume picture looks a bit better for the largest restaurants but it's also sluggish. Consumers seem to be economizing more than they were a year or two ago, one way is by eating more leftovers, or eating breakfast at home, and that poses some important questions for these industries as they seek to improve volume growth. But just as higher prices have pushed consumers into different foods and restaurant types, more promotional activity may help to bring them back. There's data to suggest that some increase in promotional activity is underway or may be soon. We'll discuss what we've found and what a pickup in discounting may mean for the companies engaging in it.

A weaker yen can boost exports and tourism profits The Japanese Yen hasn't been at these levels vs the US dollar since the late 1980s. There are two key drivers of this Yen weakness. One is the interest rate spread. The second, and probably more important longer term, is structural outflows from Japan and the biggest component of this is outward FDI (foreign direct investment) activity by Japanese corporates. The weak yen has mixed effects, boosting export competitiveness and helping tourism revenue but the softer currency also increases Japan's import bill at a time when Japan has become more reliant on them. And over time, export volumes have become less sensitive to the weaker yen, resulting in diminished benefits for the economy, especially in the short term. Still, Izumi Devalier does expect improvement in the Japanese economy in 2H24 as wage increases hit. And if the Fed cuts in December, Yen weakness should be largely contained. A further delay in Fed cuts would add additional risk.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

What's old is new again: bundling streaming services Entertainment and theme park spending growth has been weaker as demand normalizes from the post-reopening surge. But despite difficult comps, domestic attendance for key parks is flat to up with small and new attractions as a key driver. Indeed, we will get an important major new attraction in Orlando next year. In streaming, viewers can expect to see more personalized ads and ads that allow for more direct purchasing. Combined with election spend, there's a good backdrop for ad spend in the second half of the year. Bundled content is back, in streaming form, and what's interesting is that these bundles are often combining content that's not related-like a slimmed down cable TV package of old. And while overspending on content remains a risk, some secondary sports deals are coming in below expectations and premier sports can drive viewership and advertising for other content areas. The opportunity in media remains significant and below expectations while premier sports can drive meaningful viewership.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserve  

Buy now pay later slowing but still disrupting Rising card delinquency rates, particularly among lower income consumers, are one of several pieces of data that have led some to take a negative view of the US consumer. But Mihir suggests delinquency rates have started to decline recently and discusses why that's been the case. Ultimately, employment is a key driver for consumer credit and we'd be more concerned if the outlook for jobs deteriorated more rapidly. "Buy Now/Pay Later" or BNPL has enjoyed rapid growth in recent years, particularly among younger consumers, but a combination of higher rates and a weaker consumer has stalled growth. Mihir believes that BNPL is most challenging for the traditional private label card issuer market (e.g. department store cards), and will continue to gain market share. Mihir also discusses the mortgage insurance sector which has less credit risk than in the past given today's higher underwriting standards and because of the equity that many homeowners now have, owing to home price appreciation.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

A slow but steady hand on the cut button The eventual impact of higher rates on credit, the rise of private capital, slow loan growth and forthcoming tighter regulations have all weighed on bank multiples to varying degrees. But these attractive multiples relative to history, combined with a view that rates probably have peaked, keep Ebrahim Poonawala constructive on the bank group. This is particularly true for money center banks and large regionals, which are less impacted by regulatory changes coming in the wake of last year's bank failures. Ultimately, Ebrahim believes that the value of a bank comes down to the stickiness of its customer deposit base and the services it provides its customers. And certainly, there are a number of banks across the size spectrum that have attractive franchises from that standpoint. And the possibility of M&A, especially as there remain 4,000+ banks in the US, is also a key driver and one that will have disproportionate impact on small and mid-sized banks. The trajectory of Fed policy is a key consideration for the group and if the market were to move to price in a hike, that's a risk.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

Strong demand and difficult supply Over the last two decades, copper demand was inexorably linked to China. At times, China accounted for 110% of global copper demand growth. Now, countries are rebuilding their supply chains at home, building data centers and decarbonizing. While the source of copper demand has changed, demand growth remains compelling and strategist Michael Widmer is bullish on the metal while analyst Lawson Winder is constructive on exposed stocks, even as EV sales slow. On the other side is copper supply, which remains tight given the lead times necessary for new mine capacity. Uranium demand is driven by some of the same forces, as the possibility of new plants in the West rise. The uranium bear case is that 40% of the world's uranium is produced in Kazakhstan which could impact price. You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

Millennial home buying continues but in some new places New home sales are down only marginally from 2021 levels despite mortgage rates rising roughly 300bps over that period. Demand from Millennials entering peak home buying age, wealthy boomers and domestic migration have helped to offset affordability challenges created by higher rates. Existing home sales, however, have slowed to the lowest levels in roughly 30 years as homeowners are "locked-in" at low mortgage rates. A decline in rates would increase the supply of housing but Rafe believes the incremental demand would be greater than the additional supply. Rafe also discusses his outlook for new and existing home prices and the role shifting migration trends is playing in the housing market. Sunbelt population growth is still a key driver, but there are also signs that the Midwest is seeing growth due to attractive affordability and improving job market.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.  

Big portion of retailers hoping for lower rates Home improvement retail has been challenged by a number of factors of late, from pandemic pull-forward to weakness in existing home sales to inflation that's crowding out other spending. Lower rates would help and millennial home buying continues to provide some support for sales. Robby discusses the role home improvement stocks could play in the housing affordability challenges we face. Shifting to other areas in Robby's coverage, general merchandise sales have weakened as consumers battle shelter and food inflation while sales of big ticket items have suffered from high rates. We discuss continued challenges for dollar stores, the outlook for online grocery, why sales of fuzzy dice are succumbing to macro challenges and examples of data that Robby has found most useful.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

AI: Hardware Today, Software Tomorrow Corporate investments in AI have had significant impact on the financials of certain semiconductor and server companies, but while software providers stand to benefit from AI investments too, the technology hasn't yet shown up in the profits of these companies in a meaningful way. Alkesh Shah draws parallels between AI today and the Internet in 1995. Back then, investments were mainly in equipment and chips and the successful Internet companies that we know today hadn't even emerged yet. Internet applications that exist today hadn't even been imagined in many cases, suggesting that for software, much of this opportunity is still ahead. For the market as a whole, the cost savings and revenue opportunities that may come from AI are also still very much in the future, and our survey of BofA analysts suggests corporate AI implementation could boost S&P operating margins by 250bps, equivalent to ~$65bn in cost savings, over the next 5 years.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

Higher rates broadening the converts issuance market Convertible bonds (CBs) can offer equity-like returns with downside protection thanks to the coupon and the ability to redeem most CBs at par. Thus far in 2024, CB issuance has been active, well ahead of levels seen the last few years. Michael discusses the reasons for such an active issuance year, including that Pandemic debt issuance, which was at record levels in the convert space, is starting to come due and converts offer issuers the ability to lower their coupons at a time of relatively high rates. We do have a constructive view on converts for 2024 but we're not overly bullish. That's because converts tend to be issued by smaller companies, and delayed rate cuts present a risk to those stocks. Also, continued appetite for mega cap tech could be a challenge for small caps. On an absolute basis, converts perform best when equities and GDP growth are strong, and relative to equities, they act best later in cycles. Institutional investors can purchase CBs outright but retail investors can gain exposure through mutual funds and exchange traded funds.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

Earnings improvement is still fairly nascent In 2023, we saw an earnings recession, at least in the first half of the year, despite GDP growth that was ahead of trend. Back then, companies were adapting to higher rates, weaker demand and climbing costs, which weighed on earnings. Ohsung Kwon expects earnings growth to look much better in 2024. This year benefits from a lower 2023 earnings base on which to build as well as a number of positives, including rising margins through more rational costs and improved demand in certain sectors. US Equity Strategy believes that capex growth from large cap tech will be virtuous, boosting other groups from semis to hardware to power grid equipment. The end of destocking indicates the end of the manufacturing recession and could be meaningful for the earnings recovery as consumers shift from services back to the goods side of the economy. And while estimating 2025 earnings is difficult as much can happen between now and then, we see compelling growth next year too, partly on better demand, helped to some degree by Fed cuts.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

Data trends are approaching Fed threshold for rate cuts The latest economic data releases this year suggest the labor market remains strong but is cooling and the consumer is resilient in the face of sticky inflation, especially on the services side of the economy. Michael Gapen says the rebound in the labor force, labor participation and net migration played a crucial role in his revised US GDP (gross domestic product) estimates where he forecasts higher economic growth in 2024 and lower growth in 2025. Much of this positive data has led the Fed to delay their first rate cut from March to June according to our US Economics team's forecast. However, equity market strengths should help keep inflation sticky, but shouldn't reverse the downward trend. Productivity enhancements from AI still aren't reflecting in the economic data and we're still a few years off until we see AI's impact.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved

Transports would ride the cycle but modes matter Transport metrics had been in an extended downturn for around 18 months. Demand was depressed, inventory levels were high and end demand for goods had faded from COVID highs. But more recently there are signs of stabilization in some of the data tracked by BofA Global Research, partly because trucking supply has been removed. And some purchasing managers indices, or PMIs, have shown modest improvement. Ken Hoexter discusses what this improvement means for different modes of transportation and when those modes would stand to benefit. And within transports, rails have a long track record of outperforming the S&P, but since the start of 2023, the group has underperformed. Ken discusses why performance had weakened, what's changed for the better more recently and the structural changes that could benefit the rail group.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.  

A number of things can go right for Europe Earlier this month, BofA Securities hosted a Global Investor Summit in Rome, Italy. In attendance were corporate executives, prominent investors, policy experts, members of BofA management and several BofA Global Research strategists. Topics ranged from private capital to understanding central banks to the future of Europe. Michael Hartnett suggests that while European markets have been doing well, you often hear a less bullish view of the world in the region. Perhaps this is because of Europe's dependency issues, from energy to trade and beyond. But European stocks have done well at times of geopolitical peace. And Europe, with its dependence on trade, may benefit from the improving indicators that several BofA Research strategists have been highlighting. Join us in this special Europe-focused episode.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.    

Global growth matters for Emerging Markets At the start of the year, markets were pricing in three rate cuts by June and now, the likelihood of one cut by June is close to 50/50 based on market implied probabilities.  But while delayed rate cuts complicate the bull case for Emerging Markets (EM), David Hauner does point out that expectations for cuts have slid partly because of stronger economies, a positive for EM. Still, further delays in rate cuts would likely be a short-term negative for EM assets. Elections could create volatility as well. But a significant portion of EM outperformance does come around Fed cutting cycles and sentiment on China can't get much worse.  David is bullish on EM over the medium-term, he discusses why, what elections could mean, the significance of what appears to be a trough in global PMIs and the tactical opportunities in EM.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

ESG topics still impacting stocks and there's more to come US ESG funds faced a challenging 2023, seeing net outflows of around $7.1 billion, but strong markets meant that assets under management grew strongly. In the US, ESG regulations have historically been market driven, unlike the specific directives in the EU, but more recently the regulatory landscape in the US has seen a flurry of initiatives. For investors, there is state legislation that seeks to penalize managers who boycott fossil fuels and firearms manufacturers and legislation in other states that seeks to keep pensions from investing in fossil fuels and firearms. There have been legal challenges to California's legislation but changes coming from the EU will still be relevant for global companies regardless of the California outcomes. The SEC will vote on the long-awaited climate disclosure rule later today. Dimple Gosai hosts Michael Littenberg of law firm Ropes & Gray to discuss the evolving ESG regulatory landscape and which regulations may impact ESG investors.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.

Rate policy isn't the only big Fed change likely for '24 Since emerging from the COVID pandemic, the Fed has contracted the size of its balance sheet, also known as Quantitative Tightening (QT). They've done this by allowing their Treasury holdings to mature without reinvesting the proceeds. This has placed upward pressure on yields, all else equal. But the Fed is expected to slow this process later this year. Mark Cabana says this is good news for the Treasury market as it means the private sector will have less total supply to absorb. And while some investors are fond of making the connection between the Fed balance sheet and the S&P 500, it's interesting that the S&P is making new highs while the balance sheet has shrunk, albeit from elevated levels. Mike Gapen discusses why that may be happening. You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.  

M&A activity should increase but not everywhere M&A (Mergers & Acquisition) activity had fallen to well-below the 10Y average over the last 2 years. There are various reasons for this slowdown, including higher rates and negative corporate sentiment. But between equity markets faring well over the last year and interest rates off highs, there are some reasons to expect a recovery. Indeed, we've seen a bit of an uptick. We speak with Jill Hall who points out that SMID cap valuations are inexpensive relative to large caps-another M&A positive. But Jill believes that M&A will be focused in certain parts of the market. Bryan Spillane and Peter Galbo say consumer staples companies with healthy balance sheets could engage in M&A as it becomes difficult to push price further and these companies seek other ways to grow. EB Poonawala suggests that banks could benefit from both higher M&A fees and what could be an uptick in bank mergers, especially if there's political change in November.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.  

The dynamics of the US gas market about to change US oil production grew roughly 1mm barrels per day in 2023 and while US production growth may be slowing, it's growing elsewhere including in Guyana and Brazil. Such growth outside of Saudi threatens their market share, and that could mean even more supply as Saudi looks to take that share back. That all makes for a tough backdrop for the oil price and oil-levered equities, but the situation is more positive for equities levered to US gas. Significantly more LNG exports are expected to come online over the next 4-6 years, boosting demand for natural gas and reflecting positively for gas equities. Higher exports will require a higher clearing price to incentivize production, which is why the gas curve is upward sloping, a different picture than oil. Doug Leggate joins to discuss what all of this means for US E&P companies, how more M&A in the sector will lower costs for producers, and how the correlation of population growth will play a role in oil demand over the next decade.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.  

Bundling, targeted ads among streaming growth drivers Streaming video choices have ballooned over the last decade and leading streamers are already reaching well over half of US households. But there are still a number of compelling growth drivers. The crackdown on password sharing is underway and can boost subscribers, so can bunding deals, such as those with wireless companies and there's still room for much better ad targeting. Meanwhile, streaming companies are slowing their investment in content, another positive for profitability. But it's important to weigh these positives against the headwinds from a declining linear TV business, which is problematic for some of the integrated media companies. Jessica Reif Ehrlich joins us to discuss her outlook for this dynamic group. You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.