Must Read Research
March 8, 2026
Candace Browning, Head of BofA Global Research
March is National Umbrella Month, a fitting reminder of rain showers ahead and the value of cautious planning. This week, we gauge Merrill advisors' mix of caution and optimism, size up the multi-billion-dollar AI risk to insurance commissions, map the three waves of the gas midstream buildout, and spotlight opportunities across Payments and Processors, a space battered by AI and consumer fears.
The 10th edition of our Global Wealth & Investment Management Survey shows Merrill advisors remain constructively positioned on risk assets.
Head of U.S. Equity and Quantitative Strategy Savita Subramanian notes that advisors' view on equities is still bullish, though enthusiasm is shifting away from mega-cap tech toward beneficiaries of a broader, capex-led economy. Financial advisors expect two Fed rate cuts this year and see small-caps as the highest-conviction style call over the next 4-12 months. The most notable change is a strong tilt toward Value over Growth, now at the widest margin since 2023. Despite the optimistic outlook, financial advisors are mindful of rising risk. Geopolitics has overtaken government debt and tariffs as the top market concern. Advisors are hedging geopolitical and inflation risks by increasing gold exposure — now at series highs — while reducing cash to ~7%, the lowest since 2022. Sector sentiment favors Industrials and Financials, while Consumer Discretionary remains the only sector where advisors are net bearish.
Insurance distribution stocks dropped 9% on February 9 after news broke that two digital companies had launched chatbot assistants using ChatGPT tools.
Although the AI-related stock weakness was short-lived, Insurance Analyst Josh Shanker isn't convinced the market should be so dismissive. We estimate that U.S. independent agency commissions/broker fees totaled more than $100 billion in 2025. Looking at six carriers catering to small business and personal lines, often less complex businesses, we estimate $15 billion of fees. We're not arguing for mass disintermediation but believe share loss could threaten growth rates by around 100bps (basis points). And at 15x trailing EBITDA (earnings before interest taxes depreciation and amortization), broker valuations aren't particularly compelling versus longer-term history. We see large-case businesses as less vulnerable. As for other implications, AI could help insurance carriers save on some of the $6 billion in commissions they pay out annually.
North American gas infrastructure investment is shifting as the LNG buildout matures and utility-driven expansions emerge.
Integrated, Midstream and Refining Analyst Jean Ann Salisbury identifies three waves of gas midstream spending from here. The first wave — mega pipelines linking the Permian and Haynesville to Gulf Coast LNG (liquified natural gas) facilities — is nearing completion, with more than 11 bcfd (billion cubic feet per day) of capacity already under construction, enough to meet demand through 2030 even under Jean Ann's high-growth scenario. The second wave is connecting natural gas supply to utilities and data centers, as power loads are expected to grow ~2% annually through 2035. This implies incremental gas demand of ~1bcfd/yr, sustaining pipeline spending near 2026 estimated peak levels (~$47 billion). The third wave involves a need to connect additional gas basins to coastal markets. Overall, we forecast elevated midstream capex as utility demand supports a sustained capex runway for gas-levered names.
We reinstate coverage of Payments and Processors, including global networks, scaled digital wallets, and buy-now-pay-later (BNPL) platforms, with a positive sector outlook.
Payments, Processors and IT Services Analyst Matthew O'Neill argues recent weakness reflects mispricing driven by AI disintermediation fears, regulatory noise, and uneven earnings optics rather than deteriorating fundamentals. He highlights the global card networks as the strongest risk-adjusted defensive play with room for multiple recovery which benefit from highly resilient business models where transaction tolls are a fraction of transaction value and the cash-to-card shift continues.
Featuring Commentary from Global Economics Weekly
Claudio Irigoyen, Head of Global Economics, BofA Global Research
Persistent oil spikes matter
Since the U.S.-Israel operation in Iran started, oil price volatility reignited inflation concerns. How worried should we be about an increase in global inflation? While market and survey-based inflation expectations can be sensitive to oil at high frequency, history suggests only marked and persistent spikes in the price of crude trigger persistent inflationary cycles. The initial base case, with oil prices around $15 higher than the pre-war level, was not particularly concerning for inflation. But the most recent escalation, leading oil prices to rise above $100, could become concerning if it proves persistent.
It is supply shocks that matter
Since the OPEC (Organization of the Petroleum Exporting Countries) crisis and the Iranian Revolution of the 1970s, the only clear examples we find of a long-lasting inflationary impact emanating from an oil price shock are the OPEC cuts of 1999 and the spike following the COVID recovery and the Russia-Ukraine conflict. Outside of that, the oil price spike of 2007-2008 coincided with a jump in (headline) inflation, but the experiment was halted by the GFC (Global Financial Crisis), where the global recession that followed drove down both inflation and oil prices. Similarly, higher oil prices after 9/11, Afghanistan, and Iraq generated a persistent increase in oil prices that may have contributed somewhat and very gradually to headline inflation. However, it did not really materialize into a major inflationary cycle, especially given that core inflation remained largely stable. In addition, a glance at inflation dynamics over the same period in the Euro area and Japan shows very little reaction too.
Inflation risks are gaining some traction
The consequences for the Strait of Hormuz and the risks involved certainly amount to an oil supply shock, and the situation is shaping as less benign than initially expected for markets. The initial market reaction, with oil prices moving about 30% higher than the average of 2025, or 20% higher than a year ago, may have led only to a modest transitory inflation. But the most recent escalation with oil prices rising above $100 per barrel, will become more concerning if the supply shock proves persistent.
