America at 250 – Innovation, Market Leadership and the Power of Compounding
The desk believes that the strength of U.S. market leadership will continue to drive the performance of the U.S. dollar amid ongoing structural advantages. Per the full note from BofA Global Research, the historical annual return of nearly 10% on U.S. equities can be attributed to a potent mix of innovation, robust corporate earnings, and a business-friendly environment. This underscores the enduring role of the U.S. dollar as a global reserve currency, despite potential volatility. With no immediate calendar catalysts, the focus remains on the underlying economic fundamentals that support this thesis.
What the desk is arguing
The desk posits that the long-term outperformance of U.S. equities will substantiate continued dollar strength as America closes in on its 250th Independence Day. As highlighted by Derek Harris and Jared Woodard in their discussion, the combination of innovation and corporate success plays a crucial role in maintaining this market leadership, reinforcing the demand for the U.S. dollar in the global arena.
Supporting evidence can be seen in the structural drivers discussed in the podcast, including advanced American R&D capabilities and high corporate profitability, all contributing to the resilience of the dollar. This forms a compelling narrative for institutional investors as they navigate uncertain global markets while expecting continued dollar dominance.
The alternative perspective would suggest that rising challenges to U.S. economic preeminence, such as increased market competition from other nations, might weaken the dollar's position. However, current indicators do not support this view, given the strength indicated by historical performance metrics.
Where it sits in our coverage
Our consensus target for USD/EUR currently sits at 1.075, with a range between 1.04 and 1.12. Specific firms like jpmorgan project a target of 1.10 for March 2026, while bofa offers a lower estimate of 1.04 for the same tenor.
This perspective of sustained dollar strength aligns with the broader market consensus, as most firms remain optimistic about the dollar's future performance in light of its historical resilience and ongoing structural advantages.
How other firms see it
A number of firms, including jpmorgan and goldman, express alignment with this bullish stance on the dollar, emphasizing its stability in the face of economic challenges. In contrast, bofa presents a more cautious outlook, identifying potential headwinds that could undermine U.S. dollar strength.
The trajectory of USD/JPY is particularly relevant here, as it often reflects shifts in U.S. monetary policy and market sentiment towards risk, providing traders with critical insights into dollar performance.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01U.S. market leadership is underpinned by innovation and strong corporate earnings.
- 02The U.S. dollar remains a critical component of global finance amidst structural advantages.
- 03Historical performance supports continued institutional confidence in the dollar.
- 04The current economic landscape shows no immediate catalysts to undermine dollar strength.
Market implications
Traders should monitor the USD/EUR level around 1.075, as it reflects the consensus target for future movements. Pay attention to economic indicators that lend support to the U.S. narrative of resilience, as they will likely influence market positioning as we approach critical measurement periods in 2026.
Risks to this view
A significant shift in U.S. economic policy or an unexpected financial crisis could significantly alter market dynamics and challenge the current strength of the dollar. Additionally, increased competition from emerging markets may pose risks to the U.S.'s dominant economic position.
As the United States approaches its 250th Independence Day, Derek Harris, Head of Global Wealth Management Portfolio and Investment Strategy speaks with Jared Woodard, Head of the Research Investment Committee to examine the long-run forces behind America’s market leadership. Using data that spans much of the nation’s financial history, they explore why U.S. equities have delivered nearly 10 percent annual returns and how that outperformance compares globally. The conversation also revisits the role of bonds, challenges traditional portfolio frameworks like 60/40, and highlights the structural drivers of U.S. success, including innovation, strong corporate earnings, and a business-friendly environment.
They further discuss the efficiency of American R&D and the enduring role of the U.S. dollar in global markets. This episode offers a data-driven perspective on 250 years of American capitalism and the key trends shaping the path ahead. You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life. "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation.
Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2026 Bank of America Corporation. All rights reserved.
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