Analysts at BofA Securities say investors are currently pricing in a “goldilocks” environment for the global economy. Asset valuations are close to record highs, and interest-rate curves across major economies are moving closer together.
In their note, analysts David Hauner and Ralf Preusser said that this combination of lower volatility and curve convergence suggests a calm and supportive macro backdrop. It reflects expectations of growth stabilizing and central banks keeping monetary policy largely unchanged.
However, they warned that a number of “two-way risks” could challenge this outlook.
One of the key risks, in their view, is rising uncertainty around the economic impact of artificial intelligence. They expect market volatility to increase as investors gain clarity on how AI will influence long-term growth, inflation trends, and near-term capital spending.
Equity markets have been lifted this year by optimism surrounding AI technologies. Still, there are growing concerns that valuations for AI-linked companies have become stretched. Questions are also emerging about whether massive and often debt-funded capital expenditures by major tech firms will generate the returns investors expect.
Even so, the analysts noted that AI-driven stock market gains have become a defining feature of today’s economy. This pattern aligns with a “K-shaped” post-pandemic recovery, where high earners and sectors like technology continue to thrive while lower-income groups and more traditional industries struggle with inflation, rising costs, and job insecurity.
They added that this K-shaped dynamic has made it increasingly difficult for policymakers to balance fiscal and monetary strategies. Governments and central banks face tough decisions as they weigh the benefits of public spending against the effects of interest-rate levels.
These issues also play into the ongoing debate about the long-term status of the U.S. dollar as the world’s reserve currency. While BofA analysts expect the dollar to maintain its dominant role, they said global reserve diversification will likely continue at a gradual pace.
With this broader context in mind, the analysts suggested several investment themes for 2026. Among their ideas were taking long positions in gold over silver, holding long euro positions against the U.S. dollar, and shorting the Japanese yen.
