Must Read Research
Also featuring commentary from Global Economic Weekly
July 13, 2025
Candace Browning, Head of BofA Global Research
When flying a kite at the beach, stay away from crowds and don’t run out of string. This week, we spotlight an industry less congested with investors but with strong cash flow and alpha potential, discuss why the S&P may find altitude gains challenging from here and feature a conversation about the forces lifting the nuclear power story.
The U.S. wireless and broadband markets are near full penetration—wireless is at 123%—and competition is increasing. Cable companies now account for just one-third of net broadband subscriber adds.
This raises questions about pricing, churn, and ARPU (average revenue per user) growth as telco fiber, wireless and cable compete for subs. In his reinstatement of U.S. telecom coverage, Mike Funk sees competitive intensity as the biggest overhang for the stocks. Growth now hinges on population trends, connected devices, and policy shifts. Mike urges investors to evaluate telecom names through five lenses: (1) cable risk, (2) convergence, (3) strategic positioning, (4) capital return, and (5) valuation.
Companies have adapted to policy uncertainty, with many continuing to guide on profits while estimate dispersion is near post COVID lows. But it’s hard to identify a positive near-term catalyst.
Head of U.S. Equity and Quantitative Strategy Savita Subramanian says that EPS (earnings per share) surprise framework is mixed at best. Revisions have improved to average but economic surprises have broken down. The bar is low for 2Q earnings. Consensus expects EPS growth to decelerate to 4% from 13% last quarter. Still, Savita expects a modest beat of 2%, below the 3% average and last quarter’s 6% figure. Medium-term, she is more constructive. Sell-side sentiment remains cautious, but deregulation and a pick-up in business investment could buoy markets ahead of mid-terms. Valuation implies 10-year price returns of ~1% for the cap weighted S&P but +6% for the equal-weighted version.
Nuclear scientist Jess Gehin from the Idaho National Laboratory joins our Global Research Unlocked podcast to discuss recent progress with nuclear power and future fuels.
Executive Orders meant to accelerate nuclear deployment have already stimulated activity across the supply chain. HALEU (High-Assay Low-Enriched Uranium) is a more enriched version of uranium that’s used in many of the smaller, more advanced reactors and the Department of Energy has been working to secure more material for demonstrations and sustained development. The promise of domestic supply has reinvigorated interest in thorium, an alternative to uranium as a reactor fuel and one with more plentiful U.S. deposits. Thorium was investigated in the 1960s when projections for nuclear growth were high and there were fears that uranium reserves were insufficient but as nuclear slowed, interest in thorium faded. Expectations for rapid nuclear expansion have rekindled enthusiasm and China is testing a molten salt thorium reactor. But for a number of reasons, Jess believes that uranium should remain dominant and that thorium could potentially extend resources longer term.
Claudio Irigoyen, Head of Global Economics, BofA Global Research
Don't dream it's over
Another round of tariff escalation is in the making as we reached the expiration week of the 90-day pause. Last week, President Trump targeted 23 countries with letters announcing higher tariffs effective August 1, including Japan, Korea, and Canada, three major exporters to the U.S. Over the weekend, the European Union and Mexico followed, each facing 30% tariff threats. These actions come on the back of the extension of the U.S.-China deal and the new deal with Vietnam, which may set the tone for others by penalizing re-routing of exports. 50% tariffs on copper imports were also announced.
Upside risks to our tariff base case
The most recent wave of announced tariffs would raise the effective rate by around 4pp (percentage points), with further upside risks if 15-20% blanket tariffs are implemented. That would carry around 30bp (basis points) of stagflationary risks. Based on the composition of imports over the last 12 months, the effective rate would rise to nearly 16%. In other words, there are upside risks to our base case that effective tariffs will settle at around 10%. Especially since we are still waiting on the Section 232 investigations on pharma and semiconductors, which could lead to additional tariffs.
The Fed is less likely to cut rates at the margin
The next question is then how much re-escalation risky assets are willing to tolerate before correcting lower and how much pain Trump would tolerate until de-escalation occurs as it happened in April. Even though we see upside risks, we still think there is room for the announced tariffs to be negotiated down. But in this context, with more uncertainty around the tariff shock and inflation, the Fed is less likely to cut rates at the margin. Extending the "escalate to de-escalate" strategy just increases the option value of waiting for the Fed, in line with our out- of-consensus call of no Fed cuts this year.
