BofA Global Research-Global Research Marketing 10 Key Macro Views Shaping 2026-119150498

Trading ideas and investment strategies discussed herein may give rise to significant risk and are not suitable for all investors. Investors should have experience in relevant markets and the financial resources to absorb any losses arising from applying these ideas or strategies. >> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analyst under the FINRA rules. Refer to "Other Important Disclosures" for information on certain BofA Securities entities that take responsibility for the information herein in particular jurisdictions. BofA Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Refer to important disclosures on page 27 to 29. 12907217 Global Research Marketing 10 Key Macro Views Shaping 2026 Investment Strategy 1) More bullish than consensus on 2026 US GDP growth Boosted by the OBBBA, restoration of TCJA benefits, fiscal stimulus, Fed cuts. 2) No AI bubble yet AI investment spend has already boosted GDP growth and BofA US Economics expects continued AI growth next year. Derivatives Strategy’s new Bubble Risk Indicator suggests we’re yet to see bubble-like instability in core US tech. 3) Constructive EM, solid backdrop with lower USD and oil A weaker USD, lower rates and low oil prices provide a solid backdrop while technicals are favorable, especially with investors long-term underinvested. 4) More bullish than consensus on 2026 China GDP growth We recently raised our China GDP growth forecast. The Trump-Xi meeting in Korea set a more positive tone on trade, and policy stimulus is trickling in. 5) Muted S&P returns but expect broadening, strong capex US Strategy expects 14% EPS growth in 2026 but only 4-5% S&P price appreciation. We expect a strong, broadening capex cycle; we are more concerned about consumption. 6) US needs lower inflation, favor long bonds in 1H26 Michael Hartnett believes President Trump needs lower inflation and that contrarian Treasuries should be well bid until the new Fed Chair in May. Start trading “MID.” 7) Expect flattish long rates and US home prices US Rates Strategy expects the 10Y to end 2026 at 4-4.25% with risks to the downside. Securitized Products Strategy expects housing to become front and center in ’26. We expect flat home price appreciation and an improvement in housing turnover. 8) Expect volatility, especially as AI impact becomes clear A better understanding of the impact that AI has on growth, inflation and capex will cause volatility. K-shaped recovery, fiscal dominance are other sources of vol. 9) Private credit returns likely lower in ’26, prefer HY We expect 5.4% total returns for Private Credit (PC) in ’26, down from 9% in ’25. Potential for lower returns will impa