Rising card delinquency rates, particularly among lower income consumers, are one of several pieces of data that have led some to take a negative view of the US consumer. But Mihir suggests delinquency rates have started to decline recently and discusses why that's been the case. Ultimately, employment is a key driver for consumer credit and we'd be more concerned if the outlook for jobs deteriorated more rapidly. "Buy Now/Pay Later" or BNPL has enjoyed rapid growth in recent years, particularly among younger consumers, but a combination of higher rates and a weaker consumer has stalled growth. Mihir believes that BNPL is most challenging for the traditional private label card issuer market (e.g. department store cards), and will continue to gain market share. Mihir also discusses the mortgage insurance sector which has less credit risk than in the past given today's higher underwriting standards and because of the equity that many homeowners now have, owing to home price appreciation.

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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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The eventual impact of higher rates on credit, the rise of private capital, slow loan growth and forthcoming tighter regulations have all weighed on bank multiples to varying degrees. But these attractive multiples relative to history, combined with a view that rates probably have peaked, keep Ebrahim Poonawala constructive on the bank group. This is particularly true for money center banks and large regionals, which are less impacted by regulatory changes coming in the wake of last year's bank failures. Ultimately, Ebrahim believes that the value of a bank comes down to the stickiness of its customer deposit base and the services it provides its customers. And certainly, there are a number of banks across the size spectrum that have attractive franchises from that standpoint. And the possibility of M&A, especially as there remain 4,000+ banks in the US, is also a key driver and one that will have disproportionate impact on small and mid-sized banks. The trajectory of Fed policy is a key consideration for the group and if the market were to move to price in a hike, that's a risk.

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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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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.

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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.

©2024 Bank of America Corporation. All rights reserved.

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.

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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.

©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.

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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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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.

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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.

©2024 Bank of America Corporation. All rights reserved.

In 2023, we saw an earnings recession, at least in the first half of the year, despite GDP growth that was ahead of trend. Back then, companies were adapting to higher rates, weaker demand and climbing costs, which weighed on earnings. Ohsung Kwon expects 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, including rising margins through more rational costs and 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 for the earnings 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 on better demand, helped to some degree by Fed cuts.

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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.

©2024 Bank of America Corporation. All rights reserved.