Must Read Research
April 19, 2026
Candace Browning, Head of BofA Global Research
This week, we reassess S&P 500 fundamentals after the index clawed back into positive territory and unpack lessons from our DC trip.
The S&P 500 has recovered its losses and is now modestly positive for the year.
Earnings revisions remained unusually constructive, particularly in Technology and Energy, despite estimates typically falling into Q1 results. Since late February, 2026 S&P 500 EPS (earnings per share) estimates rose 3%, lifting consensus growth to 17% year over year (y/y), as the forward P/E (price-to-earnings) compressed over 10% from October's peak. Slowing buybacks, less dovish central banks, and inflation weighed. With an expectation for earnings growth in the teens, Head of U.S. Equity and Quantitative Strategy Savita Subramanian looks for further multiple compression–inflation is expected to pressure consumption, new tech issuance should weigh on valuations, and TMT (Technology, Media, and Telecommunications sector) is likely to see additional multiple compression as companies become more capital-intensive and leverage rises. At the sector level, Industrials appear stretched, with positioning the most overweight since 2011 and valuations at record highs. The lagged impact of oil and gas prices may pressure Staples and Discretionary, while Tech and Financials offer more upside.
Iran and AI dominated conversations at BofA Global Research's Small Talks Symposium in Washington D.C. last week.
We heard from 125 speakers, 20 central banks and were joined by 350 clients. While most experts believe there will be Iran resolution in the next 1-2 weeks, with sanctions relief and agreements on nuclear enrichment, views on the impact of AI ranged widely, from expectations for big job losses to incredible productivity gains. The U.S. is generally seen as benefitting from AI and resilient spending thanks to the K-shaped economy. Many believe that inflows into emerging markets will resume on strong fundamentals and what has been a muted US Dollar rally in response to higher oil. Sentiment on Brazil is positive, especially with its energy exposure. Though China is an energy importer, strong technology exports and a commitment to renewables contribute to optimism. Inflation is generally running below targets in Asian countries, giving them more ability to look through temporary oil price shocks.
Featuring Commentary from Global Economics Weekly
Claudio Irigoyen, Head of Global Economics, BofA Global Research
The curious case of the Iran War
The Iran war has raised questions about the unusual behavior of key assets. U.S. equities have climbed back above pre-war levels, gold has sold off rather than rallied, and consumption has remained resilient despite higher energy risk. Together, these dynamics suggest markets are not dismissing the conflict but rather pricing a familiar pattern. Investors appear to be applying lessons from the trade war era, assuming escalation is ultimately followed by de-escalation and a relatively contained macro impact.
The resilience of U.S. equities reflects this logic. Markets are effectively pricing a high probability of a near-term resolution and a limited drag on global growth. This can be understood through a strategic interaction between policymakers and markets. When selloffs become severe, policymakers have incentives to step back, which in turn encourages markets not to fully price worst-case outcomes. As a result, risk assets tend to move only in proportion to the probability of further escalation. The main vulnerability lies in a scenario where Iran prolongs disruption, such as limiting access through the Strait of Hormuz, which would force markets to reassess risks that currently appear underpriced.
Gold’s decline during the conflict is also consistent with this framework. In recent years, central banks accumulated gold as insurance against geopolitical shocks. When the shock materializes, that insurance can be drawn down to provide liquidity or support currencies, while speculative positions are reduced during broader risk trimming. At the same time, U.S. consumption has remained firm due to K-shaped dynamics, with wealthier households driving spending. This structure supports resilience if the oil shock proves short-lived, but it could amplify downside risks if higher energy prices begin to undermine asset values and wealth effects persist.
