[Music plays through opening animation of a telescope pointing into the sky at dusk]
On screen copy:
2026 year ahead outlook
Geopolitics, policy and your portfolio
On screen disclosures:
Please read important information at the end of this program. Recorded on 11/18/2025.
[Chris Hyzy faces the camera, speaking directly to the viewer.]
Chris Hyzy
An unsettled global world order. A midterm election that could create a shift in power dynamics in Washington. And the hangover from the longest government shutdown we've ever seen. These are just some of the factors influencing the policy and geopolitical outlook for 2026.
On screen copy:
Chris Hyzy
Chief Investment Officer
Merrill and Bank of America Private Bank
Chris Hyzy
I'm Chris Hyzy, chief investment officer for Merrill and Bank of America private bank. Joining me today is Larry Di Rita head of public policy for Bank of America. Larry's experience spans the Department of Defense and Capitol Hill. So he's the perfect person to help us make sense of 2025 and obviously what's ahead for us in 2026.
[The shot widens, zooming out to show Chris Hyzy and Larry Di Rita seated at a table in conversation.]
Chris Hyzy
Larry, thanks for being here.
Larry Di Rita
Yeah, thanks for having me, Chris.
Chris Hyzy
So let's start with 2025.
Larry Di Rita
Yeah.
Chris Hyzy
All right. We're about to leave it. We're going to go into a whole new year. Before we think ahead, let's look back on 2025. A lot of numerous policy initiatives were put in place. It was somewhat of a volatile year. Relates to what we witnessed and experienced. Looking back on that, what really surprised you?
On screen copy:
Larry Di Rita
Head of Public Policy
Bank of America
Larry Di Rita
Yeah. Well, so the administration, the president, President Trump came into office in 2025. So that was obviously a big transition between the prior administration. They came in wanting to start establishing their own priorities quickly in three broad areas. And when it comes to the U.S. sort of domestic, it was taxes, tariffs and regulation. So those were the three stools.
On screen copy:
3 Key Priorities for Administration
Taxes
Tariffs
Regulation
Larry Di Rita
And it, what actually surprised me, frankly, if you remember, in 2017, it took almost a whole year to get the Tax Cut and Jobs Act passed. They got the, the one big beautiful bill passed in shorter amount of time and provided some stability around the tax. So the first argument that the market was looking for is can we see some permanence and stability in taxes. We got that in and they did a, you know, pretty effective job getting their priorities through and getting all that done. Now it's the tariffs. And we're starting to see that to some degree settle in. But there's more work to be done. And then the big one is deregulation.
Chris Hyzy
So now let's switch to 2026. What's in store for at least the first half?
Larry Di Rita
Yeah. Well, you remember we had you referenced the government shutdown. It's not, it's over for now. And I think it would be a mistake to look past what has to happen to make sure it doesn't happen again, if you will.
On screen copy:
Federal funding runs out at the end of January if no deal is reached.
Larry Di Rita
So they made an agreement to get to spend at the current levels until the end of January. But they also made certain commitments to work on the premium tax credits on the Obamacare and get some progress there if it can be done. And there's a rough consensus to try and do something. But what that what the something is there's a lot of differences. We got to see if we can kind of get through this January 31st deadline without another potential shutdown. And unfortunately, there's political advantages from some vantage points of keeping that tension alive. And so hopefully we can get through that and, and then see the stability and then move into a, you know, what becomes a more customary midterm election year.
Chris Hyzy
It's a great point. Speaking of potential tension, yeah, we have a potential change. It looks like in the chairmanship of the Federal Reserve.
Larry Di Rita
Yeah.
Chris Hyzy
Does timing matter in terms of the announcement?
On screen copy:
Federal Reserve Chair Jerome Powell's term is set to expire in 2026.
Larry Di Rita
It might. Now they're doing a, I think, a good job vetting names already and getting them out into the market. Let people start to get comfortable. These are the candidates, and the Treasury secretary is more or less indicated who those are, though they have to make an actual decision between now and the end of the year or even into early next year. Well, ultimately, the president will decide what he wants to do there, but it's going to be several months before there's a new chairman. And the question is how much time do they really need to have this person kind of exposed, as distinct from, okay, we've nominated this person. We're going to put him before the committee, have his hearings and move on.
Chris Hyzy
Move on. So one of the one of the areas that's tough to move on from is the interconnectedness of the US with China. But also some of the developments that are still going on in the Middle East. You want to take a global lens right now in terms of our international relations?
Larry Di Rita
Well, you mentioned China and that's the, so I said, tariffs are starting to come into shape.
On screen copy:
Geopolitical factors to be aware of:
U.S. - China economic tensions
Larry Di Rita
China's the one exception. There's a bit of a detente right now between the US and China. You see these things spike and then come back down. That's the most current cycle we're in where they there was the meeting in Korea between the president and president XI Jinping. And that kind of reset the clock to say August. So it sort of got us back to a little bit more of a stable footing. What actually comes out of all that remains to be seen. That's the big one.
On screen copy:
Geopolitical factors to be aware of:
Tensions and allegiances in the Middle East
Larry Di Rita
You mentioned the Middle East. You know, we've seen a recent visit to United States by the crown prince of Saudi Arabia. There's Israeli elections next year. There's a strong desire to see the Saudis join the Abraham Accords and normalize relations with Israel. That would be a really, important step toward sort of some stability in the Middle East. We've still got Iran out there. And that really hasn't been resolved. And so the Middle East is an area where they're still hopefully, we'll see this Gaza peace plan kind of unfold in a way that really does lead to some stability in that part of the region.
Chris Hyzy
You talked about China overall, and one of the biggest topics that we're dealing with now, the race for dominance of technology, digital infrastructure, etc. and huge components of that are rare earth minerals.
Larry Di Rita
Yeah.
Chris Hyzy
Do you want to talk a little bit about the work that your team is doing there?
Larry Di Rita
Yeah. The rare earth is an important issue. It seems to have provided the Chinese government leverage over the United States in these negotiations. Question is how long that leverage can last because the rare earths are less rare than people think.
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Rare earth elements represent 17 elements with difficult and costly extraction and processing procedures.
Larry Di Rita
What's rare is the ability to process these. And the world sort of subcontracted that to China many years ago. And so China stepped up and decided this would be a competitive advantage for them. And they're taking advantage of that in a very effective way. The question is, over time, can the rest of the world. And there's a whole right, actually beginning in prior administrations to create a sort of critical minerals, sort of a coalition around critical minerals.
Chris Hyzy
Difficult, yeah.
Larry Di Rita
And you're seeing the U.S. government is actually making investments in whether the U.S. this is an administration that is very comfortable with industrial policy, with meaning of, sort of state driven, you know, private sector investment scheme. They've already taken a couple of equity positions in some companies. We've seen that already. I expect we'll see more of that as they really as they try and get past this. I think somewhat temporary but still durable Chinese advantage in the processing of rare earth minerals.
Chris Hyzy
One of our larger themes, really, since I guess the new administration took over, but really, in the last few years, is this increase in defense spending globally, particularly in Europe, coming out of the still situation that's going on with Russia and Ukraine? Do you want to talk a little bit about that?
Larry Di Rita
Yeah. No, it's an important development. And again, something that's been building over many years. But the president has done a very good job. And the European leaders agreeing that Europe needs to step up and spend more. The European Commission is talking about as much as $800 billion in additional fiscal capacity for all those countries to spend. They're developing European defense funds, you know, in the multibillion dollars. So I think you're going to see more and more infrastructure spending in Europe and defense spending in Europe, coming out of governments, coming out of the private sector. It's a high priority. You're going to see probably a lot of, U.S. defense companies trying to become very important there, but also European companies stepping up and really getting involved.
Chris Hyzy
Yeah. We're going to switch a little bit back to U.S. interest now: midterm elections next year. Everyone's starting to talk about it already. Is it too early to just not just handicap things but too early to suggest what are the big issues?
Larry Di Rita
It's probably you're going to start to see that.
On screen copy:
Congressional control at stake in midterm elections.
Larry Di Rita
And I don't think it's too early to think about, you know, the big issues, ultimately a control of you know, sort of how much can the president and the administration get done if they lose control of the House of Representatives? That's the big that's what's at stake. And there's only a few seat margin for the Republicans right now. The issue ultimately is control of the president's agenda, because if he loses the House, then you get a sort of standoff where it's hard to get a lot done.
Chris Hyzy
One final wild card question. Big discussion is still the data center build out, the race for technology dominance. Do you. In the Washington circles. Is that a big theme for Washington?
Larry Di Rita
It's a big theme, but that no one is quite sure that they know enough about to want to do something dramatic. I mean, we talked about rare earths already and what the administration's doing, their chips and things like that. But when it comes to AI, you're seeing a general or like digital assets, things of that nature. You're seeing a general sort of respect for this is really big. It could be transformational. We don't know that. So let's not move too fast. And I think that's what you're seeing more than anything else. Congress has tried to prevent the states from legislating too aggressively on AI, for example, and the proper uses of AI. The states still want to be able to do something. California and others have introduced legislation to do that. But Congress knows there seems to be a sensibility that this is big and it's transformational. So don't move too fast. Or you could lock in something that we're not going to like.
Chris Hyzy
Deregulation coming?
Larry Di Rita
Yeah, I think we're going to see more of that. Like I said, the three stools, the three legs of the stools, taxes, tariffs and deregulation, they're really addressing all three of them pretty aggressively. And we're going to see more in the area of permitting and you know, things of that and bringing products to market faster. And, you know, just in terms of bank regulation, we're seeing a reset with some of the things that have been long talked about and are finally being addressed. So yeah, I think we're going to continue to see those three. The administration knows it has to make progress in those three areas for the economy to continue to grow.
Chris Hyzy
That's right. So Larry, I want to thank you for joining me today.
Larry Di Rita
Thanks for having me, Chris. It's terrific to talk to you.
[The screen transitions to white before returning to a shot of Chris Hyzy speaking to the audience.]
Chris Hyzy
We hope you enjoyed this look at key policy issues. As our conversation shows, policy changes and geopolitical events may change with little or no warning.
On screen copy:
Keep in mind:
- Stay invested for the long term
- Remain diversified
- Speak with an advisor
Chris Hyzy
While our conviction for a positive, even transformative year ahead for the economy and equity still holds firm, it's important to prepare for a potential jolts and short term volatility. Remember that investment strategy starts with your own personal goals. We recommend staying invested for the long term. Staying diversified, and speaking with an advisor about adjustments that may be needed as the world and your personal priorities evolve. Thanks for watching.
[Screen transitions to disclosures.]
On screen disclosures:
Important Disclosures
The opinions expressed are as of 11/18/2025 and are subject to change.
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[End of transcript]
Geopolitics and government policy are set to have a big hand in the economy and markets in 2026. The evolving relationship between the U.S. and China, continuing negotiations — and a Supreme Court decision — on tariffs, upcoming rate-cutting decisions by the Federal Reserve, and the midterm elections are just a few of the events with the potential to move markets.
In the video above, Di Rita speaks with Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank, about all of these issues and more. "Government policy and geopolitical events can shift with little to no warning," says Hyzy. "It's important to know what to watch for so that you can begin to prepare for any volatility that might occur."