Bank of America’s Aditya Bhave offered an upbeat perspective on the U.S. economic outlook, suggesting that 2026 could be bolstered by several significant supports even as the economy stands “at a crossroads.”
Bhave highlighted what he called a “striking dichotomy between strong economic activity and soft labor data,” but said the bank’s central expectation is that “consumer resilience will help stabilize the labor market.”
The bank projects “above-consensus growth of 2.4% in 2026 and 2.2% in 2027.”
Bank of America outlined five major tailwinds for the coming year.
First, it expects the OBBBA to contribute “0.3-0.4pp to GDP growth in FY26, via consumer and capex stimulus.”
Second, BofA believes “the lagged effect of ongoing Fed cuts is likely to buoy activity in 2H26.”
Third, the bank said “trade policy should turn more supportive for growth regardless of whether the IEEPA tariffs are overturned.”
Fourth, it anticipates that “AI-related investment will continue to support the economy next year.”
Finally, BofA added that “base effects from the shutdown should mechanically boost 2026 GDP growth.”
Still, the bank noted that inflation will likely stay above the Federal Reserve’s target. It lifted its 2026 inflation forecast following the growth upgrade, expecting headline and core PCE to reach “2.6% and 2.8%, respectively,” and suggesting tariffs will keep core PCE “above 3% through 3Q.”
On employment, BofA said the labor market is “cooling, but not in the non-linear fashion that is characteristic of cyclical downturns.” The bank expects monthly job growth to average 50,000 in 2026, with unemployment sliding to 4.3% by late next year.
Overall, BofA characterizes 2026 as “sunny side up,” supported by several growth catalysts despite ongoing uncertainties.