U.S. — Bank of America released its mid-year economic outlook on July 7, 2026, describing the U.S. economy as "K-shaped." The bank characterized the divergence as "reflation for higher income, stagflation for lower income."

The outlook included spending data from the week of June 6, 2026, showing lower-income spending increased 5.5% year over year. Higher-income spending rose 6.1% during the same week. Spending by the top 5% of income earners increased 7.8%, while spending by the top 1% rose 9.0%.

Similar trends appeared in data for May 30, 2026. Lower-income spending increased 4.0% year over year on that date. Spending by the top 5% of income earners grew 7.6%, and spending by the top 1% increased 8.6%.

Bank of America forecasts real GDP growth of 2.3% for 2026. The unemployment rate is projected to remain near 4.3% in 2026. The bank forecasts Personal Consumption Expenditures (PCE) inflation will be 3.5% in 2026, with core PCE inflation estimated at 3.3%.

The bank anticipates 75 basis points of rate hikes in 2026. It estimates investment in artificial intelligence will contribute 0.4 percentage points to GDP growth in 2026. Adjusted for imports, AI investment is estimated to rise to 0.7% of GDP in 2026.

The outlook noted that half of small-cap debt consists of short-term or floating-rate loans. The bank stated a 75-basis-point hiking cycle could increase Russell 2000 ex-financials net interest expense by 13% of 2025 earnings before interest and taxes in 2027.