When the market's consensus expectations often become synonymous with mediocrity, true excess returns are always hidden from the majority's view.
According to the Chase Wind Trading Desk, the Bank of America Merrill Lynch strategist Jared Woodard's team has listed ten highly impactful yet severely underestimated &#34;anti-consensus&#34; scenarios in their latest annual heavyweight report titled &#34;Top 10 Surprises for 2026.&#34;
The report points out that hard data may contradict recession theories, with U.S. economic growth potentially reaching 2.6%, benefiting cyclical assets; the dollar may face a turning point, weakening to favor value stocks, cyclical sectors, and commodities;
In terms of U.S. stock sectors, Bank of America predicts that uranium prices may surge over 50% to $130 per pound, bringing significant opportunities to the nuclear energy sector; equal-weighted indices in U.S. stocks may outperform large-cap stocks, with significant valuation recovery potential for small and mid-cap stocks; emerging market bonds are expected to become the best assets for risk-adjusted returns.
<h2>Hard Data Contradicts Recession Theories, Dollar May Face a Turning Point</h2>
Prediction 1: U.S. Economic Growth at 2.6%
Bank of America Merrill Lynch economists hold an optimistic view on the U.S. economy for 2026, predicting real GDP growth of 2.6%, significantly higher than the market consensus of 2.1%. The GDP surprise may come from faster progress in regulatory easing, more Federal Reserve rate cuts, tariff refund checks, and higher corporate investment against a backdrop of increased productivity.
Hard data supports the optimistic outlook:
<blockquote>
<ul>
<li>The U.S. trade deficit narrowed to $29 billion, the narrowest level since 2009</li>
<li>The number of new business formations in the fourth quarter reached a record 517,000, a historical high, which is a metric highly correlated with future productivity growth</li>
<li>In December, the number of upward revisions in corporate earnings exceeded downward revisions, with the global earnings per share revision ratio reaching a four-year high</li>
</ul>
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</blockquote>
Overall, hard data indicators have risen to +0.4 standard deviations (the highest since April 2022), while soft data sentiment indicators remain at a low of -0.8 standard deviations.
Prediction 2: Weaker Dollar Triggers Global Currency Market &#34;Rebalancing&#34;
Global policymakers are correcting record imbalances in capital and commodity flows that have persisted for decades. The dollar's weakening from its strongest level since 1985 may signal a shift towards a more balanced global economy.
Bank of America Merrill Lynch forex strategists expect the trend of renminbi appreciation to continue, with a year-end target of 6.8 (currently at 7.0). In the long term, there may be even greater room for renminbi appreciation: domestic senior economic advisors have recently expressed support for a stronger currency to boost domestic consumption and balance imports and exports, with former central bank officials suggesting that the correct exchange rate could be 5 or even 4 renminbi to 1 dollar.
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<h2>U.S. Stock &#34;Power Transfer&#34; and Nuclear Energy Revival</h2>
Prediction Three: Equal-Weighted U.S. Stock Index Outperforms the Market
Over the past decade, the equal-weighted S&amp;P 500 index has only outperformed the market-cap weighted index in two years: 2016 and 2021. Since the launch of ChatGPT in 2022, the return of the market-cap weighted index (78%) has been nearly double that of the equal-weighted index (40%). In 2025, investors sold off equal-weighted ETFs.
Reasons for a turnaround in 2026:
<blockquote>
<ul>
<li>Earnings growth in the broad market is converging towards the &#34;seven giants&#34;</li>
<li>Capital expenditures in non-tech sectors may expand</li>
<li>Clear tax/trade policies release corporate investments</li>
<li>Accelerated buybacks</li>
</ul>
</blockquote>
In the long term, the equal-weighted S&amp;P 500 index is over one standard deviation cheaper relative to the market-cap weighted index, with valuations implying an annualized return of +6% for the equal-weighted index, while the S&amp;P 500 is at -1%.
Prediction Four: Uranium Prices Surge Over 50% to New Historical Highs
Uranium and nuclear power stocks have rebounded 168% from their April 2025 lows, with increasing global public policy support.
Reasons for bullishness strengthen:
<blockquote>
<ul>
<li>Bank of America Merrill Lynch metal strategists predict uranium prices will rise to $130/pound in Q4 2026 and reach $135/pound in 2027, with supply-demand imbalance as the main driver</li>
<li>Disruptions in Asian supply or competition among data center builders may lead to price overshooting</li>
<li>Stock analysts have raised target prices for miners, utilities, reactors, etc., noting that power companies need to replenish uranium supplies in the second half of 2026</li>
<li>On the policy front: Nuclear power seems to have become a strategic priority for the U.S. government, which recently approved $2.7 billion to support domestic uranium enrichment</li>
</ul>
</blockquote>
Based on current prices, Bank of America Merrill Lynch's forecast implies a 58% increase in uranium prices.
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Prediction Five: Unmanned Military Systems Drive Defense Sector Upgrade
Global defense spending is set to increase significantly in 2025, but investors are concerned about whether profits can keep pace, as the rebound in Q3 2025 failed to sustain.
The importance of unmanned military systems is becoming increasingly prominent:
<blockquote>
<ul>
<li>High-profile use in the Red Sea and the Russia-Ukraine conflict highlights the vulnerabilities of outdated systems and the cost issues of using traditional defense measures (like $2.1 million missiles) against low-cost drones ($20,000)</li>
<li>Conflicts may extend beyond Europe, the Middle East, and Africa, potentially accelerating the upgrade timeline for outdated equipment, software, and infrastructure</li>
<li>Countries like Sweden, Australia, Japan, and India have recently announced new investments in drones and countermeasures</li>
</ul>
</blockquote>
The new U.S. national security strategy emphasizes, &#34;The significant gap between low-cost drones and missiles seen in recent conflicts and the expensive systems required for defense exposes our need to change and adapt.&#34;
<h2>New Hunting Grounds for Returns: Emerging Markets and CLOs</h2>
Prediction Six: Emerging Market Bonds Become the Best Global Asset
According to Bank of America Merrill Lynch's forecast, the expected return on local emerging market bonds is 11%, with a moderate historical drawdown, potentially becoming the best-performing major asset globally by 2026 on a risk-adjusted basis.
The fundamental outlook is optimistic:
<blockquote>
<ul>
<li>Expectations for interest rates in the U.S. and globally are declining, with Bank of America Merrill Lynch predicting a 70 basis point decrease in short-term rates for emerging markets, with rate cuts expected across all regions.</li>
<li>Government and corporate balance sheets are more robust, with the default rate for emerging market companies at 2.1%, well below the historical average of 3.5%.</li>
<li>The earnings revision ratio in Latin America is at its highest level since 2024.</li>
</ul>
</blockquote>
Structural underweight: Emerging market bonds account for 0-3% of fixed income allocations in many U.S. households, but represent over 20% of global external debt.
Prediction Seven: Declining default rates may lead CLO ETFs to outperform U.S. Treasuries
After high-profile bankruptcies like First Brands and Tricolor, some investors plan to avoid the credit market this year, concerned about the narrowing spreads between investment-grade and high-yield bonds and the risks of a default cycle.
The reality is more optimistic:
<blockquote>
<ul>
<li>The default rate on senior loans recently fell from 4.7% to 3.4%.</li>
<li>This year’s Federal Reserve rate cuts may ease financial conditions for borrowers, supporting liquidity and maintaining strong economic activity.</li>
</ul>
</blockquote>
In this context, collateralized loan obligation (CLO) ETFs may become a more attractive source of yield than long-term government bonds. CLO ETFs are expected to see strong demand in 2025 (with inflows of $12 billion), and Bank of America Merrill Lynch strategists anticipate continued demand from U.S. and Japanese banks. ETFs holding AAA-rated shares yield over 5%, with very low credit risk and zero duration.
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Prediction Eight: ETF assets surpass the market capitalization of G7 countries (excluding the U.S.)
Global exchange-traded fund (ETF) assets under management are expected to grow by 32% in 2025, reaching a record $18.4 trillion, following a 29% increase the previous year.
If this trend continues, by the end of 2026, ETF assets will exceed the current market capitalization of G7 countries (excluding the U.S.) at $24 trillion.
ETF products have far surpassed stock index funds, expanding into factor indices, options strategies, as well as systematic and alpha-seeking models. Actively managed stock ETFs have seen significant growth, with net inflows increasing by 48% in 2025.
Prediction Nine: Abundant liquidity supports a banner year for closed-end fund issuance
Demand for new closed-end funds (CEFs) over the past four years has been the lowest this century (excluding the global financial crisis).
A turnaround may occur in 2026:
<blockquote>
<ul>
<li>Abundant liquidity</li>
<li>Eased financial conditions</li>
<li>Financial deregulation</li>
<li>CEF valuations are at moderate levels</li>
</ul>
</blockquote>
The potential turnaround may be based on existing demand for alternative assets, credit, and CLOs, as well as the recent success of hedge fund strategies. Based on the average of positive net issuance years since 1987, a reasonable expectation for successful years could mean $11 billion or more in new CEF issuances
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Prediction Ten: England Wins the World Cup
Currently, the Kalshi prediction market ranks Spain as the most likely team to win (16.1%), followed by England (13%), France (10%), Brazil (10%), and Argentina (the defending champion, 9.9%).
England has won the World Cup once in 1966. This time may end the &#34;sixty years of pain.&#34; The England team performed perfectly in the qualifiers, winning all eight matches with zero goals conceded, making them the only UEFA team to achieve this.
This tournament will be jointly hosted by 11 cities in the United States, 3 cities in Mexico, and 2 cities in Canada, marking the first time the World Cup is co-hosted by three countries.
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<h2>Review of 2025 Predictions</h2>
Bank of America Merrill Lynch reviewed its top ten predictions for 2025:
<ul>
<li>
S&amp;P 500 Returns Over 20% for the Third Consecutive Year: The actual total return was 17.9%, quite close.
</li>
<li>
Tariffs at Work, Trade Rebalancing: Net exports reached their highest level since 2021; the trade deficit is the narrowest since 2009.
</li>
<li>
Investment Unlocking: Corporate investment is strong, but not due to these catalysts.
</li>
<li>
AI Models Exhaust Human-Created Training Data: No signs of exhausting human-created data yet.
</li>
<li>
Government Bond ETFs: $168 million outflow from government bond ETFs with a duration of over 10 years.
</li>
<li>
Eurozone Moves Away from Zero Debt/Zero Energy: European countries increase defense spending, Germany halts the debt brake.
</li>
<li>
Yen and QQQ: The yen was nearly flat (-0.29%), while QQQ rose +21%.
</li>
<li>
Demand for Alternative Investments: Retail private credit fundraising reached record highs, with $21 billion flowing into CLO ETFs.
</li>
<li>
Submarine Cable Cut: On December 31, the Finnish Navy seized a vessel suspected of cutting submarine cables.
</li>
<li>
Grid Vulnerability: A blackout occurred in Spain, but losses were projected to be below $600 billion.
</li>
</ul>
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Bank of America Merrill Lynch predicts that the U.S. economy will grow by 2.6%, the equal-weighted U.S. stock index will outperform the market, the weakening dollar will trigger a "rebalancing" in the global foreign exchange market, uranium prices will surge over 50% to a historic high, unmanned military systems will drive upgrades in the defense sector, emerging market bonds will become the best assets globally, default rates will decline, CLO ETFs may outperform U.S. Treasuries, ETF assets will surpass the market capitalization of the G7 (excluding the U.S.), ample liquidity will support a banner year for closed-end fund issuance, and England will win the World Cup

Bank of America Merrill Lynch's Top 10 Gray Swans for 2026: Uranium Prices Soar by 50%... England Wins the World Cup?