Global financial markets are witnessing a tug-of-war between lingering geopolitical conflicts and a massive structural surge in artificial intelligence capital expenditure. According to Candace Browning, Head of BofA Global Research, a powerful combination of exceptionally strong U.S. corporate profits, resilient macroeconomic growth, and relatively easy policy expectations are successfully outweighing global war anxieties. While a recent fund manager survey shows 54% of respondents expect current geopolitical conflicts to resolve by the end of June, macro risks like rising bond yields and sticky inflation remain the primary threats to watch.
The Massive Cushion of Corporate Earnings
Rather than focusing entirely on macroeconomic friction, institutional investors are investing for the long term by backing secular corporate growth.
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Upgraded Forecasts: Following a blockbuster earnings season where S&P 500 profits rose 24% (and a solid 18% even when stripping out tech megacaps), BofA Global Research aggressively upgraded its full-year U.S. corporate earnings growth forecast from 14% to 22%.
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The AI Spend Runway: Despite rising debates over long-term monetization, Browning notes that the AI infrastructure and capex investment boom has an uninterrupted runway for at least the next 12 to 18 months, supporting corporate balance sheets well into 2027.
[BofA S&P 500 Earnings Growth Projections]
Previous Forecast: ─── 14%
Revised Forecast: ─────── 22% (+8% Upgrade)
Key Secular Shifts and Macro Risks
| Theme | Current Status & Outlook |
| Broadening Market Rally | Earnings growth is successfully expanding past big tech. The AI capex boom is creating a positive ripple effect, lifting peripheral sectors like power generation and construction. |
| The Debt/Leverage Quality | Unlike the historical dot-com era, today’s heavy spenders have immense cash flow generation. Current corporate debt-to-equity ratios remain structurally healthy. |
| Post-Conflict Trajectory | Global GDP growth is expected to hold steady at 2.2% across both 2026 and 2027 with no global recession on the horizon. If tensions ease, crude oil could settle back to the $85/bbl mark by year-end. |
| Primary Systemic Risks | Broad-market volatility persists due to the uneven pace of sector normalizations, the long-term productivity proof of AI, and macro pressures from rising bond yields seeping into core inflation. |
