One of the biggest red flags highlighted by BofA is the current consensus for earnings growth.
BofA analysts have pointed out that global equities are currently priced for a 17% annualized EPS growth over the next five years, which now seems wildly over-optimistic because it ignores how AI competition will most likely cannibalize existing profit margins.
Essentially, companies might be forced to spend more on AI just to stay in the same place, eating into their margins. There’s also the "productivity disappointment" factor. While the market is pricing in U.S. productivity growth of nearly 3%, official projections from the CBO sit as low as 0.1% for the next decade. If AI doesn’t deliver the massive efficiency gains that investors have already paid for, the valuation gap could snap shut violently.
source https://www.investing.com/news/stock-market-news/bofa-sees-a-number-of-airelated-risks-that-could-challenge-rally-in-eu-stocks-4533451
