Summary of BofA Global Research - May 3, 2026

AI and the Labor Market

This week's report opens with a discussion on the ongoing debate surrounding artificial intelligence (AI) and its impact on the workforce. The consensus among the BofA Global Research team is that AI will reshape the nature of work rather than eliminate it. Historical data shows that approximately 60% of jobs today did not exist in 1940, supporting the view that AI represents a significant transformation in the labor market.

Globally, around 840 million jobs are exposed to AI, with 442 million in the Asia-Pacific region. Interestingly, aging economies, particularly in Europe, are expected to benefit the most from AI as it compensates for declining workforces. Despite the potential for automation, companies continue to seek human skills, with 72% of job openings requiring management skills and 67% requiring business-process skills. The report emphasizes that the gap between AI's capabilities and its current applications is substantial, indicating that the disruption caused by AI is still in its early stages. Adaptability, lifelong learning, and effective policy design will be crucial for favorable workforce outcomes.

Corporate Earnings Overview

The report also provides an overview of the recent earnings season, noting that approximately 75% of companies have reported their earnings. Of these, 74% exceeded earnings per share (EPS) expectations, and 78% surpassed sales forecasts. These figures are consistent with the strong performance seen in the second and third quarters of 2025, which were the best since 2021. Notably, the median stock is experiencing an 11% year-over-year earnings growth in the first quarter, marking the highest growth in five years. The report highlights that the guidance ratio is above average, with only four sectors reporting more downward guidance.

Healthcare Sector Insights

Healthcare analyst Kevin Fischbeck has upgraded three Managed Care stocks, predicting that Medicaid margins are set to improve in 2026. The report explains that the current negative margins are a result of the reversal of COVID-era benefits, which had previously led to increased enrollment and profitability. As states began to reduce Medicaid enrollment in 2023, the risk pool shifted, leading to a decline in margins. However, the report suggests that the worst is behind, and margins are expected to recover as rates adjust higher.

Tariff Rates and Economic Outlook

Claudio Irigoyen, Head of Global Economics, discusses the recent decline in the effective tariff rate, which has fallen from a peak of 11.3% in October 2025 to 8.7% in March 2026. The report notes that this decline is expected to continue, with projections suggesting that the effective tariff rate may settle between 6-8% by the end of the year. The shift towards country-sector-specific tariffs may complicate revenue recovery and could lead to trade diversions.

While the reduction in tariffs could act as a tailwind for growth, the report indicates that the impact on inflation will be minimal in the short term, as most tariffs have already been absorbed into prices. The core personal consumption expenditures (PCE) inflation is projected to remain at 3.1% by the end of 2026, with the fiscal deficit expected to exceed 6% of GDP amid lower tariffs.

Conclusion

The report encapsulates a pivotal moment in the intersection of technology, corporate performance, and economic policy, highlighting the transformative potential of AI, the resilience of corporate earnings, and the evolving landscape of tariffs and inflation.