Summary of BofA Global Research Insights - February 1, 2026
In the latest report from BofA Global Research, several key themes emerge as global markets navigate through evolving economic landscapes influenced by policy, interest rates, and the U.S. dollar. The report highlights critical insights into gold market dynamics, valuation discrepancies in energy sectors, Mexico's economic challenges, and the state of commercial lending in the U.S.
Gold Market and Bubble Risk Indicator
The report notes a significant rally in gold prices over the past three months, accompanied by increasing market instability. The Bubble Risk Indicator (BRI) has surged close to 1, signaling heightened risks in both upward and downward price movements. Other assets, including silver, the Korean Kospi index, and rare earth stocks, are also exhibiting bubble-like characteristics, primarily driven by a weakening U.S. dollar. Analysts recommend using spread-based options to manage the high premiums associated with gold investments while maintaining upside potential.
Valuation Gaps in Energy Sectors
European oil supermajors have shown some recovery in performance, yet U.S. integrated oil companies continue to trade at a significant premium of approximately 3-4x EV/EBITDA. Analysts argue that this valuation gap is unlikely to close due to structural advantages held by U.S. firms, such as higher production growth and better cash flow metrics. The report suggests focusing on companies with clear free-cash-flow inflection points for attractive risk/reward opportunities.
Mexico's Economic Stagnation
Despite its proximity to the U.S. and potential benefits from nearshoring, Mexico's GDP per capita has seen minimal improvement over the last decade. The primary issue identified is weak productivity, with total factor productivity declining significantly. The coexistence of highly efficient export firms and a large number of low-tech microenterprises creates a misallocation of resources, hindering overall economic growth. The report emphasizes the need for productivity-driven reforms to capitalize on nearshoring opportunities.
Commercial and Industrial Lending Trends
Commercial and industrial (C&I) lending has contracted notably, dropping from 8.9% of GDP in 2019 to 6.8% in 2025. This decline marks the longest non-recessionary credit contraction since 1990, which typically precedes slowdowns in industrial production. Analysts highlight that manufacturers are reducing leverage, indicating credit constraints rather than weak demand. Recent regulatory changes may unlock significant lending potential, which could support a rebound in industrial production in 2026.
The U.S. Dollar's Position
The report discusses the current narrative surrounding the U.S. dollar's weakness, suggesting that while some depreciation may occur, there are limits to how far it can fall due to global monetary policy responses. The dollar's historical strength has been supported by U.S. exceptionalism, allowing for sustained deficits to be financed at low interest rates. The report concludes that while the dollar may face challenges, its fundamental position remains robust.