Quantamental Insights: AI trumps war and peace

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Quantamental Insights: AI trumps war and peace

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Quantamental Insights

AI trumps war and peace

Macro driven by AI and oil, but AI is winning for now 28 May 2026

Since the ceasefire on April 7th, risk-on has permeated and AI has jumped into the driver Quantitative Cross Asset Strategies

seat as markets continue to expect a quick resolution to the war. Despite a still closed Global

Strait, positive growth and earnings impact from the AI theme has been the focus along Andy Pham

with resilient manufacturing, retail sales, and labor, leading equities to all-time highs, FICC Quant Strategist

and retracing volatility. While the energy price shock has arrived in inflation data, it still BofAS+1 646 743 3365

remains far from 2022 peaks. Demand destruction has yet to manifest, even as markets apham3@bofa.com

and policymakers have pivoted to more hawkish stances. Yet the longer the conflict Francisco Blanch

lasts, the harder it will be to offset the stagflationary impacts. CommodityBofA Europe&(Madrid)Deriv Strategist

+34 91 514 3070

Risk-on still supportive FX carry despite intervention francisco.blanch@bofa.com

With markets re-risking, the dollar has weakened against the majority of currencies, led TejEquity-LinkedSathe Analyst

by high beta, carry, and commodity exporting countries. This has supported carry in G10 BofAS

tej.sathe@bofa.com

and in combined G10 and EM universes. However there has been a divergence between

G10 and EM, as while relative G10 dynamics have been characterized by carry, EM

markets alone have been more susceptible to idiosyncratic risk ranging from higher

energy inflation risk to less hawkish monetary policy, leading to underperforming carry.

Still, G10 carry has been susceptible to yen intervention risk, which led to a modest

drawdown.