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

"AI boom," "strong global stock market rally," "Federal Reserve interest rate cuts," and "trade uncertainty" are undoubtedly some of the key phrases that have run through this year. As 2025 approaches its end, Wall Street investment banks have begun to release their outlooks for the global economy and markets for next year.

After the impressive performance of the U.S. and global markets in 2025, investors are eager to know how much momentum this current rally still has.

In a recent report, Bank of America Global Research predicted that the global economy will enter 2026 with momentum exceeding investors' expectations. The bank also expects stronger economic growth in the U.S. and China, sustained AI-driven investments, and a rotation of market leaders.

"Although market concerns have not dissipated, our team remains optimistic about the economy and AI," said Candace Browning, head of Bank of America Global Research.

She pointed out that external worries about an impending AI bubble burst are "overblown," and predicted that GDP growth rates in the U.S. and China will exceed market consensus expectations in 2026.

Here are Bank of America's top ten predictions for 2026:

1. U.S. GDP growth will exceed market consensus expectations

Bank of America's outlook for U.S. economic growth in 2026 is more optimistic than the overall market expectations.

Senior economist Aditya Bhave predicts that the annualized GDP growth rate in the U.S. will reach 2.4% next year. Driving factors include fiscal support from the "Inflation Reduction Act," the restoration of incentives from the "Tax Cuts and Jobs Act," friendlier trade policies, a rebound in corporate investment, and the lagging effects of Federal Reserve interest rate cuts.

In Bank of America's view, the current macroeconomic fundamentals are not as weak as many investors believe.

2. The AI boom will continue; bubble concerns are unfounded

Bank of America believes that the AI investment cycle will continue to expand rather than burst. Capital expenditures related to AI, such as investments in data centers, chips, and automation, have already contributed to GDP growth, and this driving force(8.930, -0.19, -2.08%) will remain strong in 2026.

Strategists note that capital expenditures around data centers, semiconductor capacity, and automation technology will remain robust, not only enhancing productivity but also supporting corporate profit levels.

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

3. Improved macro environment will benefit emerging markets

Due to factors such as a weaker dollar, declining U.S. interest rates, and falling oil prices, the performance of emerging markets is expected to improve.

Bank of America's emerging markets strategist David Hauner pointed out that this series of favorable factors will alleviate financing pressures in emerging markets and drive more capital into developing economies in 2026.

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

4. Improved growth outlook for the Chinese economy

Bank of America has raised its growth forecast for the Chinese economy. The bank's chief economist Helen Qiao also stated that with recent trade negotiations sending positive signals and various stimulus measures gradually taking effect, there is potential for upward revision in forecasts.

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

Bank of America equity analyst Savita Subramanian predicts that earnings per share (EPS) for S&P 500 companies will grow by 14% in 2026, but she believes the index's upside potential is only 4% to 5%, setting a target level at 7100 points.

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

6. U.S. Treasury yields may fall more than expected

Investors may have overestimated how long U.S. Treasury yields will remain high. While most expect the 10-year Treasury yield to be between 4% and 4.5% by the end of 2026, Bank of America interest rate strategist Mark Cabana predicts it will be between 4% and 4.25%.

He expects the Federal Reserve to implement interest rate cuts in December 2025 and in June and July 2026, which will exert continued downward pressure on Treasury yields.

7. U.S. home prices will remain stable, but with upside risks

Led by Chris Flanagan, Bank of America's securitized products team predicts that U.S. national home prices will remain flat in 2026, but home sales volume will see a rebound. Regional differences in home prices may widen, depending on local housing supply and residents' affordability.

As the Federal Reserve's interest rate cuts lead to lower mortgage rates, the risk for U.S. home prices seems slightly tilted to the upside.

8. Market volatility will increase as AI impacts become clearer

Bank of America expects that as investors gain a clearer understanding of how AI will reshape economic fundamentals, market volatility will rise in 2026.

The market's reassessment of AI's impact on GDP potential, inflation trends, and corporate capital expenditure cycles may trigger significant price fluctuations across various asset classes.

Bank of America also noted that U.S. fiscal policy and the K-shaped recovery will be additional factors contributing to market turbulence.

9. Private credit returns will decline

After a strong performance in 2025, returns in the private credit sector may decline. Bank of America strategist Neha Khoda believes that the total return on private credit will drop from about 9% this year to around 5.4% in 2026.

This shift may prompt investors to look towards high-yield bonds or other income-generating assets that offer higher relative value.

10. Copper is expected to have another strong year

Despite rising 35% so far this year, copper prices are expected to rise further in 2026. Although construction and manufacturing activities have been weak this year, ongoing supply constraints have supported copper prices.

Bank of America metals strategist Michael Widmer predicts that the copper supply shortage will continue, combined with policy easing and a rebound in global demand, which will provide further support for copper prices.

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