Home improvement retail has been challenged by a number of factors of late, from pandemic pull-forward to weakness in existing home sales to inflation that's crowding out other spending. Lower rates would help and millennial 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 to other areas in Robby's coverage, general merchandise sales have weakened as consumers battle shelter and food inflation while 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.

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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.