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November 9, 2025
Candace Browning, Head of BofA Global Research
Markets move like a chess match — full of opening gambits, mid-game surprises, and long plays few see coming. This week, we assess the dollar’s next move in light of AI, consider the Supreme Court and Washington’s next tariff play and track M&A participants advancing their pieces across the board.
AI-driven capex has boosted U.S. GDP (gross domestic product) according to our economists, contributing as much as 1.3 percentage points in 2Q.
This helped sustain consumer spending through wealth effects, indirectly supporting the dollar. Yet, FX Strategist Alex Cohen cautions that automation’s emerging labor impact could turn USD-negative. Rising unemployment among 20-24-year-olds and recent layoffs point to early signs of AI-driven job displacement, potentially accelerating Fed easing. But while labor markets have weakened over the last few quarters, Bank of America Internal data published by the Bank of America Institute show payroll growth steady at ~0.5% year over year in October and unemployment growth easing somewhat, suggesting no recent acceleration in job losses. AI’s long long-run macro impact remains two sided: automation may eventually suppress hiring and inflation, weaking the USD, but if AI leads to a more dynamic economy and better productivity, the dollar could be boosted. Historically, that’s been the experience in times of higher productivity as global capital seeks higher real returns in the U.S.
The Supreme Court’s tariff hearings suggest a higher likelihood that IEEPA (International Emergency Economic Powers Act) tariffs will be reversed.
U.S. Economist Stephen Juneau notes that a rollback would likely boost growth and ease inflation but widen deficits. A full IEEPA reversal would drive debt-to-GDP higher. If the administration responds by using other trade authorities to enact tariffs, we’d expect debt-to-GDP to increase by ~3 percentage points by FY35. Inflation would likely be lower in the near-term, but the positive fiscal impulse could lead to more persistent inflation through higher demand. Uncertainty and fiscal challenges stemming from a reversal would likely be net negative for the USD while rates strategy sees higher coupon supply cheapening 30Y Treasuries vs. swaps.
U.S. M&A is annualizing at the strongest pace since 2021.
Numerous factors suggest continued strength, including strong market returns, still cheap valuations of small caps and reduced political/tariff uncertainty. Aggregate deal size remains smaller, with activity concentrated in Russell 2000 and non-index stocks (~60% and ~33% of totals) while mega-cap deals are scarce. Biotech continues to dominate and Healthcare deals are tracking at record highs, followed by Banks and Software. Our analysts expect that investors will continue to reward banks where deals expand footprints into fast growing metropolitan statistical areas (MSAs) and biotech should benefit as large-cap pharma looks to replenish pipelines. Take-privates account for over 40% of activity, up from 25% during the zero-rate (2016-2021) era but down slightly vs last year. LBOs account for the second-largest share of total deal value since 2007. Still, Head of U.S. Small- and Mid-cap Strategy Jill Carey Hall cautions that credit or labor-market weakness could curb deal appetite in this cyclical asset class.
Claudio Irigoyen, Head of Global Economics, BofA Global Research
The shutdown appears to be nearing its end
The longest government shutdown on record is reportedly nearing its end. On Sunday 11/9, a group of moderate Democrats agreed to support a bill that would end the shutdown. The bill will still need to pass on the Senate floor and go to the House for approval, but we expect the government to reopen sooner than later.
What's in the deal? No extension for ACA subsidies…
The bill to reopen the government does not include one of Democrats' key asks: an extension of the expanded Affordable Care Act (ACA) subsidies that expire at year end. Instead, Republicans have promised a vote on ACA subsidies by mid-December. Additionally, the bill contains appropriations bills for the legislative branch, military construction and veterans' affairs, and agriculture. These account for ~11% of last year's appropriations, the remainder will be funded by a continuing resolution through Jan 30.
…A reversal of shutdown layoffs
In addition to a vote on ACA subsidies, the bill also will reverse government layoffs made during the shutdown. Prior to an injunction by the courts, that number totaled 4.1k. The bill also prevents any further reductions in force through at least Jan. 30, 2026, and guarantee backpay for government workers.
When will the government reopen?
The Senate will likely vote on the bill sometime this week. It could get stalled by Senators that oppose the bill. Once passed by the Senate, it will then need to be approved by the House and ultimately signed by the President. Therefore, we may have to wait a couple more days before the government is officially reopened.
What has been the total economic effect?
The shutdown should be a drag on growth of 0.6% to 0.9% due to the impact of furloughed workers. Growth in 1Q 26, however, will be boosted by the size of the drag as hours worked for employees normalizes. Still, GDP will likely be lower than it would have been had the shutdown not occurred. But the overall drag on GDP will be minimal since missed payments to workers and for services are made up.
When will we get some data?
Following both the 2013 and 2019 shutdowns, the government statistical agencies published revised data calendars. So, we will be on the lookout again for these updates when the shutdown ends. Stay tuned.
