Bank of America, which is holding its 2026 India Conference from Monday, expects global growth to slow by 40 basis points to 3.1% this year. Candace Browning told Financial Express that India is likely to regain favour among global investors once the current peak in AI-led capital expenditure moderates, allowing diversified and structural growth opportunities to come into sharper focus. Excerpts:

What is your outlook for the world’s major markets, including the US, Japan, China and South Korea? 

The outlook across major global markets remains differentiated, with earnings and interest rates shaping performance. In the US, the outlook is supported by strong earnings expectations, with consensus forecasting 20% S&P 500 earnings growth in 2026, though a disorderly rise in bond yields remains the key risk, with around 5% on the 30-year US Treasury seen as a critical threshold policymakers will seek to defend.

In Japan, earnings are also a tailwind, and rising bond yields have been supportive for equities this cycle, with bank stocks up 23% in 2026 in US dollar terms, reinforcing a constructive “risk-on” environment as long as that relationship holds. In contrast, China faces a more challenging backdrop, with earnings growth forecast at 13% in 2026, lagging the US and other regions, while bond yields continue to lead equities rather than follow them as seen in other “nominal boom” environments. Overall, while developed markets such as the US and Japan are benefiting from stronger earnings momentum, China’s comparatively weaker earnings outlook and differing market dynamics present a relative headwind.

Are you seeing a significant slowdown in global growth? 

With a base case of a relatively quick resolution to the war and a material easing of disruptions in Hormuz, we believe global growth can remain resilient. We currently expect the global economy to grow 3.1% this year, reflecting a 40bp downward revision compared to our pre-war projections. Across regions, the US is quite resilient to the energy shock, but we still think the war will subtract about 30bp of growth, and have revised down our 2026 growth forecast to 2.3%.

The Euro area, in turn, is significantly more sensitive to oil prices, and we expect sub-1% growth in the region. In China, strong export growth, abundant oil reserves, and still low inflation should help cushion the shock and anchor the outlook for Emerging Markets. However, if the war becomes protracted and the flow of traffic through the Strait of Hormuz remains virtually halted for several months, downside risks to global growth would become material.

By how much do you think the US Fed will raise rates over the next six months? 

We expect the Fed to stay on hold for the rest of the year. Although inflation has increased and economic activity has held up in recent months, it is too early to tell whether the US is headed for stagflation or reflation. Consumer spending has been supported by fiscal stimulus at the start of the year. However, with that tailwind now fading, the true test of consumer and labor market resilience in the face of the ongoing energy shock lies ahead of us. Therefore, we think the Fed will be cautious about hiking rates.

What could bring foreign investors back to India?

The end of the West Asia conflict would be a positive trigger. Also, once AI capex peaks, India would be seen favorably with diversified and structural growth avenues. In the meantime, policy reforms, if implemented, could drive FII investors towards India.

Where do you think US treasuries are headed? 

Our base case is for the 10Y Treasury to end 2026 at 4.25%. Our base case incorporates our US economists’ expectation of no Fed hikes in 2026 and 50bp of cuts in 2027. We see risks to our forecasts as skewing higher due to strong US economic activity, elevated inflation, and rising odds of Fed hikes. As a result of these risks, we currently like positioning for higher 2Y rates and a flatter 2s5s curve.

How do you read the trend in the US dollar? Do you believe it could strengthen meaningfully? 

The dollar has traded mostly sideways versus most G10 currencies for the better part of the past year, amid several crosscurrents. Expectations for easy US monetary policy and the potential for asset rebalancing globally formed the basis for a consensus short-USD narrative dating back to last year. However, recent strength in broad readings of the US economy has caused many, ourselves included, to question this.

Higher oil prices should also support the dollar, as the US economy is notably more insulated from a terms-of-trade shock than most other G10 economies. We see upside risks to the dollar from here—and could well envision a break higher of its recent ranges—but the odds of a retest of the post-Covid highs are still quite remote.