In a financial world still bracing for slow growth and the lingering effects of stagflation, Bank of America is issuing a surprise warning: the Trump economy might not just recover — it could take off.
In a new report released Monday, BofA Research analysts argue that markets may be missing a major “tail risk”: a full-blown economic boom.
“Today, a confluence of forces suggests that the real risk isn’t just a rebound — it’s an unexpected surge,” the team wrote.
Five Signs Pointing to a Boom
According to BofA, five key trends are laying the groundwork for stronger-than-expected economic expansion:
- Political Momentum: With the 2026 midterms on the horizon, the Trump administration and Congress are pushing short-term, pro-growth policies to energize the economy and voters alike.
- The “One Big Beautiful Bill Act” (OBBBA): President Trump’s signature legislative package aims to supercharge domestic manufacturing and industrial development, channeling billions into onshore production.
- Global Stimulus Wave: Abroad, reflationary efforts are gathering pace. Germany recently passed the largest stimulus package in EU history, and other nations — including China — are rolling out significant spending initiatives.
- Massive Capital Expenditures: Tech giants like Amazon, Meta, Microsoft, and Alphabet are projected to spend nearly $700 billion between 2025 and 2026 on infrastructure, AI, and data expansion. Foreign companies are also increasingly investing in U.S. manufacturing, while local governments ramp up infrastructure upgrades.
- A Shift in BofA’s ‘Regime Indicator’: This proprietary metric — which blends corporate earnings revisions, GDP forecasts, and other macro trends — is on the verge of shifting from “Downturn” to “Recovery.” Historically, that transition has preceded a surge in value stocks and overall market gains.
Despite a dominant narrative of caution among fund managers (70% still expect stagflation), BofA’s team, led by strategist Savita Subramanian, says the data suggests the opposite may be about to happen. If the Regime Indicator flips in early August as expected, the bank warns investors to prepare for a rapid rotation in the markets.
But Is the Spending Real?
Governments around the world have already committed to major stimulus plans:
- China has pledged over $179 billion in special treasury bonds this year, plus $600+ billion in local government bonds.
- The EU is still disbursing funds from its €806.9 billion NextGenerationEU plan, supplemented by new national initiatives.
- Japan, South Korea, Canada, and Australia have launched targeted 2025 fiscal programs addressing everything from energy to industrial support.
In the U.S., corporate America has announced waves of new investments in manufacturing and technology since President Trump took office. However, many of those projects — including the $500 billion OpenAI “Stargate” supercluster — face challenges, particularly in securing funding and speeding up construction timelines.
So while the ingredients for a boom are lining up, the big question remains: will enough of this spending materialize quickly enough to fuel the kind of explosive growth BofA envisions?
For now, Bank of America says the upside risk is very real — and the markets may not be pricing it in.
