Tariffs imposed under the International Emergency and Economic Powers Act (IEEPA) account for about 9.5pp of our estimated 14.7pp effective tariff rate after the reduction in fentanyl tariffs on China. Therefore, the Supreme Court's decision could have important implications for activity, inflation, deficits, debt, interest rates, and the dollar. We discuss risks and scenarios after the oral hearings. As expected US Treasury maintained nominal coupon sizes unchanged but also did not guide towards higher bill share. Instead guidance suggests appetite to grow coupon supply in 2027. We discuss scenarios and implications for the US rate and spread curve.   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. ©2025 Bank of America Corporation. All rights reserved.

We discuss the FOMC rate and QT decisions. US front-end rates now look much more fairly priced. QT decision disappointed us and we remain concerned about US funding markets. ECB meeting was a non-event, but Euro Area data surprises on both activity and inflation mean that the hawks will likely retain the narrative into the December meeting. We outline what this means for our ECB call and why we still see value in EUR rate markets. 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. ©2025 Bank of America Corporation. All rights reserved.

Years of equity gains has wealth effect bolstering spend Aggregate consumer data remains solid despite signs of a slowdown in labor markets.  Declining labor supply accounts for some of the labor weakness but other metrics, including the ratio of job vacancies to unemployment, suggest softness in demand as well. We examine why consumption has held up despite these signs of weakness and part of it comes down to the wealth effect, which has boosted some consumers at a time that others have been challenged by continued cost increases and a slowdown in wage growth.  We also discuss the sources that investors can use for economic data given that Federal data is currently limited.  And get into some of the risks to spending, particularly since equities have been unusually strong over the last several years, leading to questions around whether weak or stagnant equities could remove a key support for consumption.  Could announced and future capex investments in the US spark renewed demand for labor?  We address this as well, and so far, our US Economics team isn't holding its breath.   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. ©2025 Bank of America Corporation. All rights reserved.

Electrification requires copper but supply picture is dim The outlook for oil prices is bearish in the near term owing to excess supply, but beyond that, prices should firm as supply growth slows. Between geopolitics, economic growth and the dollar, there are plausible scenarios for both higher and lower oil, which Francisco discusses in some detail. And while Francisco and the commodity strategy team came into 2025 bullish on gold prices, they're less constructive following the substantial rally and suggest that copper may be more interesting at the moment, particularly with the metal's exposure to growth in electrification and continued supply challenges, which got more acute in the last few weeks. Francisco also addresses aluminum, which can be looked at as power in solid form, making it interesting in a time of persistent growth in power demand.    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. ©2025 Bank of America Corporation. All rights reserved.

Takeaways from our inaugural APAC Conference BofA Global Research hosted its inaugural APAC Conference earlier this month. Timing was opportune. The Chinese CSI 300 Equity Index has outperformed the S&P year-to-date, following years in which the opposite was true and that's helped to pique investor interest. Over 1,200 investors and 300 corporates attended. Winnie Wu joins us to discuss her takeaways from the conference and her views on markets. Winnie believes Chinese equities will remain relatively more attractive in the EM context given the lower valuation and better growth potential for China. She adds China and Korea in particular are very well positioned to leverage AI to help offset their demographic challenges and can potentially achieve higher than expected long-term GDP growth thanks to AI-driven efficiency.   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. ©2025 Bank of America Corporation. All rights reserved.

Stablecoin progress to come with time and reg. clarity Ebrahim Poonawala has been busy exploring the topic of stablecoins and the impact on banks. He's hosted expert events, started a series of notes on the topic and has communicated with bank CEOs on developments and potential bank offerings. Ebrahim joins the podcast to talk about regulatory progress but the hurdles that remain before consumers and businesses can start using stablecoins just as they use deposit accounts. He also discusses how, for most consumers, there are inadequate incentives to switch from traditional credit cards to stablecoins for payments. He addresses the economics of stablecoin issuers, which are highly dependent on the level of interest rates, and how, if traditional banks were to issue a consortium led stablecoin solution, it could drive network effects and adoption. We also tackle the related topic of tokenized assets and the advantages they can provide. Stablecoins also come with risks, one of several reasons that adoption could progress more slowly than some expect.   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. ©2025 Bank of America Corporation. All rights reserved.

Still managing to add value for patients and payor While US markets make new highs, the S&P managed care index is half the level it was a year ago. We talk to Kevin Fischbeck about what's driven the substantial weakness and whether deterioration in medical loss ratios (MLR) is temporary or something that will last and prevent these companies from recapturing past margins. Kevin also discusses the different markets served by managed care, from commercial to Medicare Advantage to Medicaid and how profitability challenges are likely to last longer for some of these markets than for others. But he also addresses how managed care adds value to each of these settings, delivering care more effectively and cheaply than the alternatives. He notes that vertical integration is still part of the strategy at some managed care companies, and something that can still help to better align incentives, but that it's been overshadowed by challenges faced elsewhere in the business. 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. ©2025 Bank of America Corporation. All rights reserved.

10Y yields should fall if Fed more dovish than expected Leading up to Powell's speech at Jackson Hole, the market has priced in a high likelihood of a 25bp cut at the September FOMC meeting. The prospect of rate cuts has helped to lift homebuilding stocks and the group is up 16% since the end of June. But the 10Y Treasury yield is more relevant for homebuyers taking out fixed-rate or even adjustable-rate mortgages. So a key question is how Fed cuts, which should come--it's just a question of when--may impact long rates. And if rate cuts do result in lower 10Y Treasury yields, what does it mean for affordability. Mark Cabana believes that a very dovish Fed, even amidst a backdrop of higher than desired inflation, could still manage to push long rates lower. Rafe Jadrosich talks about affordability and regional housing dynamics, given that supply is above 2019 levels in Florida and Texas but well below levels from six years ago in the Northeast and Midwest.   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. ©2025 Bank of America Corporation. All rights reserved.  

Coffee away from home enjoying demographic tailwind Restaurants have faced some of the same sales challenges experienced elsewhere in the economy as chains more reliant on lower income consumers have felt more pressure than those with a higher income skew. Sara Senatore discusses the opportunity that inflation and a more selective consumer have created for fast casual and even casual dining. But dining preference shifts mean that fast casual tailwinds extend beyond price gaps. Sara talks about why she expects the category to continue to take share of restaurant spending. The Away-from-home coffee is a category continues to grow even though US per capita coffee consumption has been flat to down for decades. Sara discusses why demographics could keep this running. We also address immigration, labor shortages and restaurants use of AI.   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. ©2025 Bank of America Corporation. All rights reserved.

Rev beats bode well but may not lead to big index gains The percentage of companies beating on earnings and revenues this season is higher than average and the percentage beating on sales is the highest in four years. Tariffs may be playing a role in the sales beats but either way, the better than expected revenues suggest companies are able to raise prices, a positive sign for corporate resilience. Coupled with softer labor markets and AI, the prospects for operating leverage are strong. And while it's tech and megacaps driving capex growth thus far, Savita believes that even narrow capex growth can lead to a broadening of stock performance. Savita squares all of this with her S&P target which offers limited upside. Whether it's this year or next, the Fed is likely to resume rate cuts and we discuss implications for markets and styles.    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. ©2025 Bank of America Corporation. All rights reserved.

Could be in the early stages of a re-weighting into EM Emerging Market (EM) equities have outperformed the S&P 500 so far this year. The weaker US dollar has furnished a number of positives for EM assets, from cheaper funding to less imported inflation to a more attractive carry trade. David Hauner discusses the various positives ahead, including superior economic growth, central bank cutting cycles and the possibility of a lengthy dollar decline. David also discusses EM credit which has seen buying from US investment grade and high yield funds attracted to compelling yields. One of the main risks to this bullish view is a significant deterioration in global trade. So far, however, trade numbers look good and should things deteriorate enough to warrant Fed rate cuts, the dollar could weaken further, bolstering relative performance for 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. ©2025 Bank of America Corporation. All rights reserved.

Several positives for US defense but FY26 a tough comp Defense spending growth in the US and Europe is accelerating. The shift is particularly acute in Europe, where NATO allies had been spending between 1.5% to 2% of GDP on defense equipment but agreed in late June to spend 3.5% by 2035 (5% including other national security spend). Stocks of the European defense contractors have performed well this year as the market begins to anticipate this stronger spend and Ron Epstein addresses to what degree this spending will flow to US defense contractors, given Europe has an interest in boosting the domestic defense industry. Certain programs, like the F-35 fighter jet, could take a decade or more to replace should Europe be interested in their own program, while others could be replaced more quickly and this is a reason why US contractors could lose share of Europe spend with time. Ron also addresses the role that drones could play, implications for higher-end defense equipment, whether F27 is poised to be a down year for US defense spending and the new and existing equipment that could be demanded by the US' Golden Dome.   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. ©2025 Bank of America Corporation. All rights reserved.

Limited near-term catalysts for market upside The US Equity Strategy team recently raised its S&P 500 target but the target implies little to no upside between now and year-end as the team sees few positive catalysts over the next several quarters. Fiscal impulse from the One Big Beautiful Bill will be positive but lower than originally expected. The US Economics team expects the new fiscal plan to add between 0.3% and 0.4% to GDP growth in 2026 and to fade thereafter as benefits are front-loaded. US Economics does expect an important change next year as the Fed should start cutting rates and US Strategy discusses how this could boost certain areas of the market. But before discounting 2026 cuts, stocks may have to contend with a pricing out of 2025 cuts-US Economics doesn't expect rate reductions to start until the back half of next year. Jill and Aditya discuss tariffs, the resiliency of large corporates in particular and how tariff strategies could be impacted if higher costs begin to noticeably impact prices.   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. ©2025 Bank of America Corporation. All rights reserved.