Global Research Unlocked

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.

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"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.

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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.

Home improvement retail has been challenged by a number of factorsof late, from pandemic pull-forward to weakness in existing home sales toinflation that's crowding out other spending. Lower rates would helpandmillennial 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 toother areas in Robby's coverage,general merchandise saleshaveweakenedas consumers battleshelter and food inflationwhile 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.

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.

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.

In 2023, we sawan earnings recession, at least in the first half of the year, despite GDP growth that was ahead of trend.Back then, companies were adaptingto higher rates, weaker demand andclimbing costs, which weighed on earnings.Ohsung Kwonexpects 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, includingrising margins through more rational costsand 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 fortheearnings 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 onbetter 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.

The latest economic data releases this year suggest the labor market remainsstrongbut is coolingandthe consumer is resilient in the face of stickyinflation,especiallyon the services side of the economy.Michael Gapen says the rebound in the labor force, labor participation and net migrationplayed a crucial role inhis 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 Juneaccording to ourUS 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

Transportmetricshad beenin an extended downturnfor 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 insome 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 whatthisimprovement means for differentmodesof transportationand when those modes would stand to benefit.And within transports, railshave a long track record of outperforming the S&P, but since the start of 2023, the group has underperformed. Ken discusses whyperformance had weakened, what's changed for the better more recently andthestructural changes that could benefit therailgroup.

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.

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.

At the start of the year, markets were pricing inthreerate cutsby 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 EmergingMarkets (EM),David Haunerdoes point out that expectations for cuts have slid partly because ofstronger 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, hediscusseswhy, what elections could mean, the significance of what appears tobe 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.