Potential for increased adoption of stablecoins and implications for the banking sector has become a hot topic among investors given the push among policymakers. Eventually, consumers might be able to buy dollar-linked stablecoins and potentially earn interest on these assets, meaning more competition for bank deposits. There are regulatory hurdles that first need to be cleared but Congress is currently considering a few proposals that could bring this closer to reality. While the use case beyond cross-border payments seem limited at the moment, the potential for non-banks (Big Tech / Big Retails) to come up with creative solutions to induce adoption poses risks. That said, potential for banks to issue a stablecoin once the regulatory framework is in place could mitigate risks, Ebrahim Poonawala discusses these issues as we delve into stablecoins, the areas where they could be particularly helpful to consumers and how, if adoption winds up being significant, they could impact everything from US Treasury demand to loan funding, to payment fees.

You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.

"Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities.

©2025 Bank of America Corporation. All rights reserved.

As tariff fears have moved to the background, a different economic concern has moved to the foreground-growing fiscal deficits and the impact on interest rates. Public debt-to-GDP stood at 98% last year and is set to rise further. We discuss why deficits have captured the market's attention today and whether growth aspects of the budget plan could be offset by the higher interest rates. While the boost to growth isn't large, certain groups should see benefits. This includes senior citizens, also business investment may benefit later in the year, especially if tariff uncertainty has peaked. The US Rate Strategy team believes that a mismatch of demand and supply of Treasuries at the long end of the curve could lead to more cheapening of Treasuries, meaning that the 30Y yield could move further above swap rates. In theory, the recent Moody's downgrade of the US' credit rating could lead Congress to a more balanced budget and but on that, our guests were skeptical.

As tariff fears have moved to the background, a different economic concern has moved to the foreground-growing fiscal deficits and the impact on interest rates. Public debt-to-GDP stood at 98% last year and is set to rise further. We discuss why deficits have captured the market's attention today and whether growth aspects of the budget plan could be offset by the higher interest rates. While the boost to growth isn't large, certain groups should see benefits. This includes senior citizens, also business investment may benefit later in the year, especially if tariff uncertainty has peaked. The US Rate Strategy team believes that a mismatch of demand and supply of Treasuries at the long end of the curve could lead to more cheapening of Treasuries, meaning that the 30Y yield could move further above swap rates. In theory, the recent Moody's downgrade of the US' credit rating could lead Congress to a more balanced budget and but on that, our guests were skeptical.

Smart glasses may weigh on phone sales, lift Internet use

Smart glasses could be the next big opportunity in personal technology. Leading tech companies are focused on the form factor and functionality like augmented reality and 4K video may follow today's applications, which include AI assistants, music playback, phone calls and hands-free texting. Ultimately, these devices could stretch out the smart phone replacement cycle, like phones have managed to stretch the replacement cycle for laptops. In the 2030s, we could even see a world where smart glasses are the default personal device. But while there could be big changes ahead, that doesn't mean that hardware and software incumbents are about to be disrupted. Wamsi Mohan discusses why he believes incumbents have a major advantage in smart glasses and much of it comes down to control of the ecosystem. There's risk for incumbent Internet companies too but many of them have proven adept at adjusting business models in the past and the new form factor could even enhance business models as Internet use rises further.

You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.

"Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities.

©2025 Bank of America Corporation. All rights reserved.

USD overweight exposure is now normalizing

Even as equities have rallied substantially from April lows, recovery in the dollar index, or DXY, has underwhelmed and the currency sits near the lowest level it's been in three years. Alex Cohen believes that while there are cyclical reasons for the dollar weakness, there's also been a bigger structural rethink on the currency by investors from the push toward de-globalization and from questions around US exceptionalism. Alex sees German fiscal reforms as a game changer, another dollar negative. But our own survey shows very negative sentiment for the dollar, which is relevant to the short term. Mark Cabana contributes with a discussion of rates given the important interplay between the Treasuries and currencies. Mark believes that there has been a shift away from US Treasuries by global investors, although a lot of this recent shift is a function of investors reducing their overweight position rather than getting outright negative. Mark also discusses debt sustainability concerns and how budget negotiations may impact bonds going forward.

You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.

"Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities.

©2025 Bank of America Corporation. All rights reserved.

Looming tariffs lead to renewed focus on transfer pricing

Multinational companies have used transfer pricing as a way to reduce tax bills. Transferring a product from a lower tax jurisdiction allows profits to be taxed at the lower corporate rate, so a higher price can mean greater tax savings. But tariffs would be based on the higher price, meaning that some of the same companies using this practice to lower tax bills will also face higher levies. Travis Steed discusses what this means for medtech, the impact transfer pricing has had on tax rates, whether practices could change under a tariff regime and why the group is still a compelling, defensive investment

You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.

"Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities.

©2025 Bank of America Corporation. All rights reserved.

Budget conscious consumers indulge in healthier foods

There's been a shift in snacking towards healthier options and away from some of the convenience store classics. A stretched consumer seeking value for their dollar seems to be allocating spend to cleaner alternatives. These often contain more protein and less of what's perceived as harmful. Rising GLP-1 (glucagon-like peptide-1) usage may be a minor contributor to these shifts too, though it's likely that more of this impact is ahead of us as penetration of these drugs rises and oral options arrive. Outside of food, alcohol consumption has fallen, creating structural headwinds industries like beer. Pete Galbo discusses trends and what these shifts mean for his coverage. Mike Dick, Consumer Sector Specialist, who is not a member of the research department, joins in to ask a few questions.

You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.

"Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities.

©2025 Bank of America Corporation. All rights reserved.

Euro defense spend benefits US contractors near-term

European plans to spend more on defense as a percentage of GDP were hatched in the immediate aftermath of the Ukraine invasion. More recently, the German Parliament agreed to reforms that allow for even more spending on defense. But for a number of reasons, Europe would like to keep more of this spending within the Euro Area. Ron Epstein and Ben Heelan discuss what Europe may be able to procure internally and what they'll be buying from US contractors. And if the US is spending less on defending Europe, Ron addresses where spending priorities may shift, especially as the US may be less focused on preparing for a land war. Ron also tackles the question of whether Europe may be encouraged to buy more defense gear in exchange for lower tariffs.

You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.

"Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities.

©2025 Bank of America Corporation. All rights reserved.

Our Global Investment Summit in Dubai offered attendees some perspective on what Dubai and the UAE are doing to advance AI. Panels also offered a look at how the technology is being used beyond the borders of the UAE and threats it brings. Sonali Thiesen, Global Head of FICC e-Trading and Markets Strategic Investments and Haim Israel were panelists at the Summit. Haim discusses the critical role that cybersecurity will play as AI evolves. He shares feedback and key ideas from his "World in 2030" note and addresses recent weakness in AI equities. Sonali discusses the continued shift to electronification in the fixed income markets, how machine learning continues to play a growing role in those markets and how Gen AI and blockchain have the potential to generate additional efficiencies.

You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.

"Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities.

©2025 Bank of America Corporation. All rights reserved.

We recently hosted a two-day Global Investor Summit in Dubai. Panels as well as formal and informal discussions touched on everything from the investment merits of Dubai and the Gulf Cooperation Council (GCC) to US policy to evolving views on non-US markets. Michael Hartnett discusses his latest views on international markets and how investors are reacting to uninspired price action from US stocks. With so many investors coming in to 2025 with a US exceptionalism portfolio, US policy risk has them reassessing regional positioning. But risks for non-US markets aren't absent either and Michael discusses his preference for international even amidst tariff risks.

You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.

"Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities.

©2025 Bank of America Corporation. All rights reserved.

Small businesses have faced challenges, from higher costs to difficult hiring to higher rates and mixed demand. The Bank of America Institute examines the bank's proprietary data to better understand the US economy. Based on data through February, the Institute found that for the first time in three years, deposit growth among small clients surpassed balance growth, a sign of improved profitability. Taylor Bowley from the Institute discusses what's driving that improvement but cautions that tariffs and other risks are important to watch. Brad Sills discusses how small business makes up the majority of revenues for several software companies, so the health of these businesses is critical. Sluggishness in small business profitability over the last several years means that improvements, should they persist, could boost growth for these companies. Brad also discusses why software companies catering to small businesses have certain advantages that companies with larger customers do not.

You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.

"Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities.

©2025 Bank of America Corporation. All rights reserved.