Must Read Research
Also featuring commentary from our economists
September 14, 2025
Candace Browning, Head of BofA Global Research
This week, we explain why gold equities continue to shine despite a market-cap surge and APAC’s shifting fortunes in the age of AI.
Gold has surged past $3,500/oz to fresh highs, fueled by U.S. rate cut expectations.
The rally pushed global gold sector market capitalization to ~$550 billion, near 2x the prior peaks in 2020 ($331 billion) and 2011 ($334 billion), according to Lawson Winder Senior North American Metals & Mining Analyst. The sector’s value is now more than 3x the 2022 cycle low ($170 billion) and over 8x the 2016 low ($70 billion). Despite these record levels, gold remains a smaller share of global equities—0.39% today vs. 0.71% in 2011. Holding world equity market cap constant, a return to that 0.71% share would imply gold sector capitalization approaching $990 billion. From a valuation perspective, Lawson notes that the sector still trades below prior cycle peaks, suggesting further upside potential if momentum persists.
Winnie Wu Chief China Equity Strategist and our Asia Pacific (APAC) Equity Strategy team see AI investment and adoption reshaping APAC economies, companies and geopolitics.
The technology was a key topic at last week’s APAC conference. The global AI market is expected to quadruple from $300 billion in 2025 to $1.2 trillion by 2030, with $3-5 trillion of cumulative investment, ~$1 trillion of that in APAC. As the backbone of the global AI ecosystem, APAC benefits from policy support, research strength, and manufacturing capacity, with China in particular advancing toward a self-sustaining AI ecosystem. Winnie remarks that nations with demographic challenges (China, Japan, Korea) could harness AI for productivity gains, while others reliant on cheap labor (e.g., India’s IT services) risk displacement. She notes that AI has also become a catalyst for equity performance. China’s CSI AI Index multiple jumped from 55x to 73x in two months, raising overheating concerns. She expects key drivers to be infrastructure, chips and equipment, applications, and sovereign AI clouds, with Taiwan’s AI foundries, Korea’s high bandwidth memory (HBM) and China’s AI chips/GenAI software leading rapid growth.
Claudio Irigoyen, Head of Global Economics, BofA Global Research
Easing concerns over a bond buyers' strike
Heading into this year, we were concerned about the risk of a bond buyers' strike due to rising deficits. Revenue from tariffs have eased some of our worst fears. Tariffs have raised more ~$165 billion in revenue this fiscal year (~0.5% of GDP (gross domestic product)), and we expect them to generate ~$4 trillion in deficit reduction after accounting for interest savings by FY 34. Tariff revenue won't solve the bond buyer risk but may help marginally mitigate it as the Administration has found a way to slow the rise in debt-to-GDP.
Risks to deficits and debt remain tilted to the upside
The biggest risk we see facing our deficit outlook is the current legal challenge to IEEPA (International Emergency Economic Powers Act) tariffs. After the recent Appeals Court ruling, the case will head to the Supreme Court. If found illegal, the effective tariff would drop, reigniting fears over fiscal sustainability. But we expect the Administration to implement tariffs through other trade authorities, which would limit the drop in the effective tariff rate and corresponding rise in deficits.
And the U.S. is still a long way from fiscal sustainability
Even if the risks to our forecast do not materialize, the U.S. remains on an unsustainable fiscal path. Tariffs have flattened the rise in Debt-to-GDP on the margin, but U.S. deficits will still exceed debt stabilizing levels for the foreseeable future. We remain of the view that a true fiscal adjustment will only come when markets force Congress to act.
