[Music plays through opening title sequence.]
On screen disclaimer:
Please read important information at the end of this program. Recorded on 04/28//2026.
Chris Hyzy
In recent months, we've seen an unexpected geopolitical conflict spike oil prices globally. A quick market correction, concerns over sticky inflation in the US. And despite it all, equities have continued to hit record highs with all the tumult, investors are now wondering what comes next.
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. Here with me to share his always essential perspective is Michael Hartnett Chief Investment Strategist for BofA Global Research. Michael, thanks for joining me today.
Michael Hartnett
Pleasure.
Chris Hyzy:
I want to start at what you've been asked probably every meeting. So let's start in the Middle East. Let's go right there. How is that impacting markets? What do you think investors around the world are thinking about right now?
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Michael Hartnett
Chief Investment Strategist
BofA Global Research
Michael Hartnett
Well, I think that the overall impact of what's going on in the Middle East is a world that's very different this decade to previous decades.
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Potential opportunities are being created in areas of scarce supply and big demand
Michael Hartnett
The previous decades, we tried to get right by getting demand. Right, right. You know, how much people spend where they're spending it. But this decade is all about supply. You know, and whether it's Covid, whether it's trade wars, whether it's, you know, what's going on in the Middle East, I think what investors are getting to the conclusion is you have to own what is in scarce supply.
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Race for resources globally:
- Semiconductors
- Rare earths
- Oil and gas
- Minerals
Michael Hartnett
It could be semiconductors, it could be rare earths, it could be oil. It could be, you know, minerals. You know, this is what this world is telling you because you have right now, I think, a big, big war. It's not the one in the Middle East. Yeah. The big, big war is China, US, AI. And so if you think about U.S. foreign policy right now, to me, what US foreign policy is trying to get or achieve is dominating the supply of the stuff that will win that war.
And so I think part of why investors I'm not saying that they're relaxed about the situation, but certainly where they are very willing to put money is in these areas, whether it's, you know semiconductors, whether it's commodities where they believe that there is going to be there is scarce supply and big, big demand going forward.
Chris Hyzy:
And when you talk about that shift from a demand driven environment, that goes back to well before the pandemic to right all the way back to the global financial crisis, trying to induce demand. How is that affected, you know, globalization.
Michael Hartnett
Yeah, I think that the globalization story really started with the fall of the Berlin Wall. And then it was followed with NAFTA. And then it was followed in 2001 with China joining the WTO. And you look at those periods and it was wonderful for equities but also wonderful for bonds. You know because what was happening was there was this massive increase of supply of people, of capital, of goods, of services and that supply, because it was big, led to a fall in prices. The fall in yields led to a rise in equities.
I think you fast forward to Brexit. You know Trump's first you know trade war. You know even you know some of Biden's policies. You know Trump you know 2.0 I think you're in a world which is much less global.
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Deglobalization affects both equities and the bond market
Michael Hartnett
You know what were you think about the Straits of Hormuz and people, you know, the Iranians, the Americans negotiating over we're going to charge a toll. You got to pay to go through that, right? I mean, if you're Indonesia, Strait of Malacca, why aren't you doing the same thing? Yeah. Sea of Japan, you know, English Channel. I mean, where does it stop? You're restricting the supply.
And in doing so you're raising the price of that thing that creates inflation. Doesn't necessarily mean that equities go down because you know inflation can be quite good for profits. But it does mean, as we've seen in the 2020s, that equities go up with bond yields going up not going down. Do you see what I mean? So the situation for the bond market is very different because of this supply.
Chris Hyzy:
So let's let's talk about the bond market for a second. Credit spreads are narrow. There's a lot of concern in the private credit market. There's a lot of concern about growth overall. Can it be sustained at the level that it is. There's concern about inflation. You mentioned that before. Why is the bond market saying "not my worry!".
Michael Hartnett
Well there's two bond markets. You know you talk about credit spreads. That's because people are happy to own a corporate bond. What they're less happy to do is own a government bond.
Chris Hyzy:
Particularly the long end is what you're talking about.
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Long end refers to bonds with maturities 10 years or longer.
Michael Hartnett
That's right. But it could be, you know, US, Japan, UK I mean there's lots of government bond markets where investors are looking at the government and saying, you're not going to cut spending. You're not going to reduce you know, debt. You're going to continue to run, you know, big deficits. In addition to that, you know, because investors we watch but you know we listen.
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Growing debt and deficits pose a risk for government bond markets globally
Michael Hartnett
Yeah. And what we see across this world is electorates, voters who are not voting for a balanced budget. I mean, do you think the 2028 election in the US is going to be fought by two candidates saying, I'm going to balance the budget? It's just not. So bond investors are saying that situation is not going to improve.
The risk with that is at some point people lose patience and say the debts and the deficits are just growing too much and you get a big spike in yields. And that obviously can be very, very dangerous. So far as equities and corporate bonds are concerned.
Chris Hyzy:
We've talked about geopolitical events. There's still one going on with Russia and Ukraine. Arguably speaking, we're getting used to the fact that geopolitical risk is not only elevated, it's staying elevated. You've got a commodity cycle going on right now that you've talked about quite a bit. Worries over inflation. Deficits are wide. Trying to build a balanced portfolio, just sitting here now and thinking through the next three, four or five years, what's the opportunity set look like across the asset classes from your perspective?
Michael Hartnett
You know, the corporate bonds are all time highs. The equities are all time highs. The government bonds are down 50% in five years. So clearly I have to say, if you were a secular contrarian you would be owning, at least starting to buy, the long end.
There will be an opportunity in bonds at some point in the next five years. I don't know whether it's today or after the midterms, but there will be one coming. An easier case to me right now is the asset class that has actually outperformed this decade, albeit because of gold, which is commodities.
On screen copy:
Dow Jones Commodities Index provided annualized return of 10.41% for the five years ending 4/28/2026.
Source: S&P Global data as of 4/29/2026.
Past performance is no guarantee of future results. It is not possible to invest directly in an index.
Michael Hartnett
And I think what you'll find in the second half of the decade is that the commodity bull market will broaden into metals and into energy, and I think those are areas I think that you could build weightings in. Together with that in equities, again the first half of the decade equities did well. But again it was very built on US equities, US tech, US Mega-cap.
And I'm a big believer has been the case for the past year or two that you will see that broaden, first into international markets. And I think we've seen that. Europe, Japan, Korea but also emerging markets. I think China is the big opportunity you know going forward from here. But also I think that the size story will change. Again mega caps have done very well. The Magnificent Seven has been magnificent, but it's been magnificent and was originally magnificent because people looked at that group and say they make magnificent amounts of money, cash, and they didn't spend any of it.
Chris Hyzy:
Yeah. Right.
Michael Hartnett
Now they're spending all of it and more in this AI CapEx arms race. They're not going to outperform to the degree that they have. And again, like you said earlier on, the bond market will regulate. Yes. The amount that they're allowed to sort of spend in that regard, I think the story will be more the small, the mid-cap.
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Expect a potential shift in the size story, from mega- to mid- and small-caps
Michael Hartnett
And I also think the consumer will do better in the next 3 or 4 years. I think the consumer, because I think you need to see politicians address inequality, they're need to get on top of like consumer price inflation. And I think if they can address affordability in a smart way the consumer comes into play. And those 2 or 3 things have underperformed in the first half of the decade, and I think they'll outperform in the second.
Chris Hyzy:
The final question I have for you is what excites you about the next five years from an investing standpoint?
Michael Hartnett
Well, I think number one, commodities. Number two, emerging markets. Number three, the consumer, I think the chips story, the semiconductor story, it's very, very overbought right now today. Very, very overbought. Those stocks are the most overbought they've been I think since the year 2000. So that needs to calm down a bit.
On screen copy:
Four C's to watch:
- Chips
- Consumer
- Commodities
- China
Michael Hartnett
But I would say yeah chips, consumer, commodities, China. Those are the C's that I think you know money does grow on C's. Yeah I think those are the things that will will work in your portfolio going forward. I think the thing that won't is probably the US dollar, I think there will be an opportunity to buy the long end. I think you know bonds did well in 2025. I worry a little bit in 26 with the midterms. You know, that won't be the case. But I think you have to be a little bit patient in kind of in terms of that allocation.
Chris Hyzy:
That's great. Michael, thanks for joining me today.
Michael Hartnett
Pleasure.
Chris Hyzy:
So much to unpack here. We went around the world. We talked about concerns and the larger opportunities that we see unfolding over the next few years, and always stay the course through volatility with a balanced portfolio. And remember this: staying diversified is so important to your long term financial goals. If you have questions about how to align your strategy in times of volatility, consult with your advisor if you work with one. We'll see you next time.
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The opinions expressed are as of 4/28/2026 and are subject to change.
Investing involves risk, including the possible loss of principal.
Past performance is no guarantee of future results.
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[End of transcript]
With markets at all-time highs despite ongoing geopolitical tension, persistent inflation concerns, and rising government deficits, many investors are questioning what makes sense for their portfolios in the months and years ahead. Beneath the surface, shifting global dynamics are changing how capital is allocated — and where long term risks and potential opportunities may emerge.
"This decade is all about supply," says Michael Hartnett, Chief Investment Strategist at BofA Global Research, underscoring a fundamental shift in the forces driving markets today.
In this video, Hartnett sits down with Chris Hyzy, Chief Investment Officer of Merrill and Bank of America Private Bank, to discuss how evolving geopolitics, supply constraints and a global race for critical resources are reshaping market outcomes and investor decision making. They explore what a supply driven environment could mean for equities, bonds, commodities and global diversification over both the near and long term.
Artificial intelligence lurks amid much of today's market conversation, reshaping how capital is deployed and how economies compete. From infrastructure spending to energy demand, its footprint is widening in ways that resemble earlier periods of world-changing investment. "This is a technological revolution that can only be compared to the railroads," says Hartnett, a reminder that some shifts reveal their full impact only over time.