Here are 10 themes BofA says investors should be watching.<\/p>\n
1. An M&A revival<\/p>\n
Mergers and acquisitions are expected to pick up in 2026.<\/p>\n
“M&A activity is set to accelerate, supported by regulatory change, stable rates, and pent\u2011up demand,” Bank of America analysts wrote.<\/p>\n
![\"Image](\"https:\/\/www.newsbeep.com\/nz\/wp-content\/uploads\/2026\/02\/1771166529_574_6978cd83a645d11881880a03.jpeg\")
<\/p>\n
\n Every time Naomi publishes a story, you\u2019ll get an alert straight to your inbox!\n <\/p>\n
\n Stay connected to Naomi and get more of their work as it publishes.\n <\/p>\n
The so-called “M&A super cycle” is set to benefit banking, biotech, and media industries, specifically as evolving tech, supply chain changes, lower volatility interest rates, and consolidation fuel accelerated deal-making.<\/p>\n
Morgan Stanley and Goldman Sachs are among the analysts’ top picks to benefit from increased M&A activity.<\/p>\n
2. The AI build-out hits a midway point<\/p>\n
The market is the “mid\u2011cycle of a multi\u2011year AI buildout” that kicked on in 2023, according to Bank of America analysts.<\/p>\n
“Greater scrutiny of AI returns and hyperscaler cash flows could keep stocks choppy, offset by newer\/faster LLM builders and AI factories serving enterprise and sovereign customers,” they said, noting “We believe consensus under-appreciates the mission critical, offensive and defensive nature of capex investments<\/a> being done by the largest and best funded tech companies.”<\/p>\n The firm highlighted opportunity for investors in cloud, memory<\/a>, optical, and semiconductor capital equipment. Nvidia<\/a>, Broadcom, and Marvell are some of the stocks spotlighted as winners in the mid-cycle AI build-out.<\/p>\n 3. Momentum in manufacturing fuels industrials<\/p>\n Industrials are set to benefit as demand in the US improves, Bank of America analysts said.<\/p>\n “U.S. manufacturing is returning to expansion, short\u2011cycle demand is accelerating. Ongoing capex, reshoring, easier credit conditions support an earnings\u2011driven upswing,” the note reads.<\/p>\n The US manufacturing PMI, a popular measure of industrial activity, rose above the metric indicating a contraction, which is historically followed by the industrials sector outperforming the S&P 500.<\/p>\n Pharmaceutical reshoring, chip fabs, data centers, and energy grid build-outs are some of the manufacturing projects to watch.<\/p>\n 4. Winners of growing defense spending<\/p>\n Countries across the world are hiking their defense spending, leading analysts to question which will secure growing funds.<\/p>\n “Global defense spending is entering a sustained upcycle toward 2030, driven by geopolitics and higher NATO budgets. Large defense primes could benefit.”<\/p>\n Bank of America flags Northrop Grumman, Raytheon<\/a>, and L3Harris Technologies as winners in the defense sector.<\/p>\n 5. GLP-1 pill to make a splash<\/p>\n The introduction of weight-loss drugs in oral pill form is expected to make GLP-1s accessible to a wider market, amplifying their impact.<\/p>\n Novo Nordisk’s Wegovy pill<\/a> is already on the market, and Eli Lily<\/a>‘s pursuing FDA approval.<\/p>\n It’s not the pharmaceutical industry itself that Bank of America flags as being impacted by GLP-1 pills, but pharmacy benefit managers (PBMs), food and beverage players, restaurants, and medical device makers.<\/p>\n 6. Tax refunds will boost consumer stocks<\/p>\n Bank of America expects larger tax refunds<\/a> and less significant tax payments to US households’ cash due to Trump’s One Big Beautiful Bill Act<\/a>.<\/p>\n “Tax season stimulus is expected to average ~$1,000 per household, providing a near\u2011term boost to GDP. Non-discretionary and discretionary likely boosted fairly equally and while tax benefits skew mid\/higher income, lower income more likely to spend,” the analysts said.<\/p>\n They name Dollar General, Walmart, and Costco as companies that could see outsized consumer spending from tax season stimulus.<\/p>\n 7. AI to weigh on energy affordability<\/p>\n The midterm elections are coming up, along with most states in the US facing gubernatorial elections, and the\u00a0impact of data centers<\/a>\u00a0on\u00a0Americans’ utility bills<\/a>\u00a0is a hot-button issue.<\/p>\n “Affordability concerns may shape where data centers are built, but are unlikely to slow AI\u2011driven expansion. Speed\u2011to\u2011power, storage, grid investment remain dominant forces.”<\/p>\n The analysts say Clearway, Shoals, and Generac are some of their top stock picks tied to the theme.<\/p>\n 8. Commercial real estate supply in focus<\/p>\n The commercial real estate market is expected to face supply headwinds in 2026, Bank of America’s real estate team said.<\/p>\n “Nationally, Apartment, Industrial and Self Storage REITs are poised for a meaningful slowdown in supply after outsized deliveries in 2024 and 2025.”<\/p>\n 9. Bet on prediction markets in headlines<\/p>\n Prediction markets booming, with Polymarket<\/a> and Kalshi<\/a> dominating Super Bowl ads<\/a> and running free pop-up grocery stores in NYC<\/a>.<\/p>\n Bank of America says the new betting markets could change the game for existing players like DraftKings and FanDuel<\/a>.<\/p>\n “Rapid innovation in prediction markets and new entrants are creating near\u2011term uncertainty. Legal ambiguity and pricing risks remain an overhang for Online Betting.”<\/p>\n The analysts highlighted Robinhood<\/a> as an early leader in the space among publicly traded companies.<\/p>\n 10. K-shaped economy to fuel luxury beauty rebound<\/p>\n The beauty industry is one to watch with the sector in today’s K-shaped economy<\/a>.<\/p>\n “The group sits at the intersection of staples and discretionary and we expect revenue growth to nearly double versus 2025 levels. China is the biggest driver of improvement.”<\/p>\n