A new global "industrial cycle" is emerging.

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The narrative of global assets may shift from "technology standing out alone" to "industrial and credit expansion".

According to Wind Trader Desk, Bank of America’s RIC team, in its latest report, overlays a set of public data with proprietary high-frequency indicators and concludes: manufacturing orders, Asian exports, and semiconductors (especially analog chips) are all giving the same signal—a new round of the industrial cycle may be starting, which means there’s room for consensus-beating profit growth in 2026.

BofA investment and ETF strategist Jared Woodard writes: “We may be standing at the threshold of a new global industrial cycle.” He regards “strong hard data + warming soft data + industrial momentum indicators moving higher” as a combination of evidence, and directly points this to asset allocation: more opportunities lie outside crowded trades.

BofA attributes recent bottlenecks in manufacturing expansion not to weak demand, but to unfriendly credit terms; if lending guidance and regulatory constraints (like capital charges) continue to ease into 2026, the banking system could release over $1 trillion in new capital, making industrial expansion more sustainable than relying on sentiment and restocking alone.

Meanwhile, BofA warns of another thread: when liquidity and leverage in “unknown corners” recede, SPACs, crypto assets, and private credit—these opaque and hard-to-exit assets—will be the first to expose problems.

Industrial cycle clues: Hard data leads, proprietary indicators are rising

BofA standardizes a comparison between "hard data" and "soft data": In January, hard data is 0.4 standard deviations above the long-term average, survey-based sentiment indicators are at the highest since May last year (but still 0.4 standard deviations below long-term average). University of Michigan consumer sentiment index in February rose to 57.3, the highest since August last year.

More crucially, several BofA proprietary high-frequency indicators are strengthening:

Industrial momentum indicators are at the best level since December 2021, used to infer “global manufacturing PMI has room to rise”;

Global outlook in fluid power surveys rises to 73; “demand” in truck freight surveys breaks above 60 (best since April 2022), and capacity is tightening (lowest since March 2022);

Storage indicators exceed the 2021 peak.

Together, they point to one judgment: this round of the market may no longer be entirely driven by "debt-fueled consumption" or "fiscal transfers", organic growth on the industrial side is becoming visible.

Credit conditions may be the missing puzzle piece: Lending reform extends the cycle

BofA believes manufacturing expansion obstacles lie in "unfavorable credit terms". Private credit can only partly fill the gap, and at greater cost; if guidance/regulation turn, the banking system is the bigger variable.

Several data points in the report serve as supporting evidence for “betting on credit improvement”:

NACM Credit Managers’ survey shows manufacturing sales at the highest level since 2022; historical correlation suggests about 4% U.S. GDP growth (r²=0.47).ISM Manufacturing PMI "new orders" rising, historically implies GDP growth over 3.5% (r²=0.36, sample since 1948). The report admits survey volatility makes it unfit for forecasts, but it reinforces "above consensus" bias.

On the banking side, report details constraints and easing paths: U.S. large banks’ average excess capital is 3.4 percentage points above regulatory requirement; capital requirements expected to drop nearly 1 percentage point in 2026. Potential reforms cited by Ebrahim Poonawala include: adjusting GSIB additional capital requirement may bring CET1 requirement to 13% (lowest since 2011), Basel End Game and $100B asset threshold adjustment to reduce "regulatory arbitrage" distortion between bank/non-bank financing.

These details are the core of the report making the "industrial cycle" more than a data bounce—into a "tradable macro mechanism".

Chips bring the cycle global: Analog chips & Korean export resonance

The report treats semiconductors as a “leading indicator” for the industrial cycle, specifically emphasizing analog chips — their demand is tied to industrial, defense, and power needs.

BofA forecasts chip sales will grow 30% year-over-year in 2026, possibly marking the first "trillion-dollar year" in history. Structurally, 48% storage rebound, 22% growth in non-storage core semiconductors; memory prices this year have already exceeded expectations.

Another global clue comes from Korea. BofA explains the 34% year-over-year export growth in January: memory chip prices surged, AI demand accelerated amid supply tightness, some traditional memory capacity and capital expenditure switched to AI data center products, further pushing up prices and export amounts for broader consumer memory. The report connects “Korean export changes” and “MSCI ACWI forward EPS growth”, inferring this relationship implies ACWI future EPS growth may reach 27% in the coming year, much higher than the 13% market consensus.

The point isn’t that “Korea decides the globe”, but that: when exports and chip prices strengthen together, global earnings upgrade risks are underestimated.

Expansion trades are making money, but funds still favor “stagnant assets”

The report brings "expansion trades" to the front using year-to-date returns: Small/mid-cap industrial stocks up 22%, nuclear 20%, gold 18%, global defense 15%, emerging markets ex-China 14%, developed markets small-cap value 13%. In contrast, S&P 500 up 2%, U.S. Treasury near 0%, U.S. large-cap growth -3%, traditional 60/40 portfolio only slightly above 1%.

The issue is, positioning hasn’t caught up. RIC team stats on fund and ETF flows show, “expansion assets” attracted $1.3 trillion less inflow over the past decade than “stagnant assets”: about $0.3 trillion vs $1.6 trillion. In other words, the trading signal is no secret, but allocation is still scarce.

That’s why the report repeatedly emphasizes: investors are still overallocated to the past two decades’ winners (large-cap tech, high-grade bonds), but the “scarcity of reliable returns” is changing.

Retreat in “unknown corners”: Old bill for leverage, liquidity, transparency

The report groups SPACs, crypto assets, and private credit together: as listed company supply drops (U.S. listings halved over 30 years), plus ample liquidity and scarce growth, money is pushed into more “unknown” corners; the decline beginning in Q3 2025 makes old risks expensive again.

It gives some stark comparisons:

U.S. SPAC deal volume in 2025 reached $37.6 billion, historical third largest; but average returns post-merger “not worth the risk”. A “top public SPAC index” rose just 9% over five years, badly lagging U.S. small-cap stocks (+41%). The report cites research that each $10 SPAC raises may entail $3 in fees.Bitcoin's valuation debate remains unresolved (no cash flow, unclear use value, lack of long-term “stable store of value” history), noting its annualized volatility often exceeds 100%.Private credit’s exit limitations put bluntly: quarterly redemption caps at 5% mean full exit can take five years; meanwhile, BDC/private credit exposure to software industry (18%) higher than bank loans (12%) and high-yield bonds (2%). Over past 12 months, a “private credit-heavy” BDC/fund index fell 16%, while CLO ETFs, syndicated loans, high-yield bond ETFs returned 5%-8%.

The report distills the lesson into two sentences: Leverage + illiquidity + opacity is an unstable combination. Uncompensated risk hurts investors the most—so valuations always matter.

Risk Disclaimer and TermsThe market carries risk; invest cautiously. This article does not constitute personal investment advice, nor does it account for individual users’ special investment goals, financial situations, or needs. Users should consider whether opinions, views, or conclusions here are suited to their own circumstances. Investing accordingly is at your own risk. ```