Bank of America Warns Shift in Market Leadership May Challenge Investors as Bonds Lose Safe Haven Role.Photo by Spencer Platt on Getty Images
· Photo by Spencer Platt from Getty Images
BofA’s warning is less about the next big deal and more about the basis of investment portfolios, which has apparently changed.
Hartnett believes that bonds (buffers) do indeed failed at his main job, forcing investors to rethink risk across the stock market.
Hartnett believes that rethinking is already underway.
A weaker dollar, higher commodity prices and reflation outside the US will help international and emerging market stockswho otherwise have been left behind.
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For perspective, the US dollar index has lost 9% of its value in the last 12 months and fell almost 2% in the last 5 days alone, MarketWatch noted.
To observe the figures of emerging stocks, let’s take a clear indicator in the iShares MSCI Emerging Markets ETF to see how they’ve fared against the tech-heavy S&P 500.
Throughout the year 2025, this is how the film fared.
On top of that, the global reflation argument is showing up in the numbers.
The data suggests Japan We are no longer in a deflationary era: Investing.com indicates headline inflation of 2.1% and core inflation at 2.4% (both are above the Bank of Japan’s target).
Porcelain is slightly more unequal, but consumer prices are improving, as The CPI rises 0.8% and Core CPI rises 1.2%while factory prices remain mostly deflationary. Meanwhile, the Euro zone Nor is it flirting with outright deflation, since inflation is close 1.9% and the services continue to function.
Drawing parallels to today’s stock market, Hartnett goes back to the 1970s, where the setup looks remarkably familiar.
Investors at the time flocked to the “Nifty Fifty”: dominant blue-chip growth stocks that almost seemed bulletproof. Basically, investors were willing to pay any price for quality.
However, macroeconomic conditions soon changed, driven by rising inflation figures, government intervention, a weakening dollar, and a compression in valuations.
Related: Goldman Sachs quietly renews 2026 gold price target
Although the companies survived, their stocks took a hit.
That’s exactly the parallel Hartnett is drawing now.
Today’s AI-driven mega-caps have convinced investors that they are exceptional businesses, but extreme concentration leaves the door open for a major correction if the macroeconomic backdrop becomes even slightly less favorable.
That’s exactly what IMF chief economist Pierre-Olivier Gourinchas said in a recent article I wrote, where he talked about the economy being on shaky ground.
To be honest, you don’t have to be an active stock market investor to notice how a handful of names like Nvidia and Google have driven much of the business news cycle.
In recent years, a small group of AI-linked megacaps have led stock market returns, and the data demonstrates just how skewed the rally has become.
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The Magnificent 7 already accounts for more than 34% of the S&P 500an unusually high figure for a handful of stocks.
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The top 10 stocks account for almost 39% of the index.comfortably above the peak of the late 1990s, around 27%.
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Poster children like NVIDIAthe obvious substitute for AI-driven enthusiasm, soared approximately 240% in 2023 and another 170% in 2024according to Investopedia.
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In 2025 alone, Nvidia accounted for almost 15.5% of the S&P 500’s total earnings.an astonishing statistic, to say the least.
Inflation, politics and political pressures are effectively changing the entire market context. However, it is not a question of an apocalyptic scenario unfolding, but rather of leadership rotating as new conditions take hold.
As the numbers show, we are already seeing that taking shape. For perspective, the technology-dominated S&P 500 is up 1% so far this year, trailing the Russell 2000’s 7.5% gain over the same period, the Associated Press reports.
The sector’s leadership is also not in technology at the moment.
Here’s a look at the total return performance (dividends included) of the top ETFs representing their respective industries through January 23, 2026.
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Energy (XLE): +10.02% to date
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Materials (XLB): +10.19% to date
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Consumer Staples Products (XLP): +6.73% to date
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Industrial (XLI): +5.87% YTD
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Technology (XLK): +0.78% YTD
Source: totalrealreturns.com
Other Wall Street strategists, including Jeremy Siegelprofessor emeritus at Wharton and chief economist at WisdomTree, echoes this sentiment.
In a recent interview with CNBC, Siegel said the long-promised extension of market leadership appears durable, raising questions about the strength of the tech mega-cap rally.
Related: Top analyst revises Palantir price target ahead of earnings
This story was originally published by TheStreet on January 24, 2026, where it first appeared in the Economy section. Add TheStreet as a preferred source by clicking here.
