Bank of America’s chief investment strategist Michael Hartnett is urging investors to flip the script, backing Main Street over global elites as cooling inflation, AI disruption and political pressure reshape markets ahead of the US midterm elections.
The expert made a bold call in his latest Flow Show report: Investors should “stay long Detroit, short Davos,” favoring U.S. small- and mid-caps, banks, REITs, emerging markets and international stocks over the so-called Magnificent 7 and other Big Tech giants.
Hartnett’s central message is that markets are beginning to value a political and economic shift toward affordability.
That change matters.
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Since Trump’s inauguration in January 2025, the so-called “Bro Billionaire” basket, an equally weighted mix of Nvidia Corp. (NASDAQ:NVDA), Meta Platforms Inc. (NASDAQ:META), Palantir Technologies Inc.. (NYSE:PLTR)Tesla Inc.. (NASDAQ:TSLA), ARK Innovation ETF (NYSE:ARKK), Apollo Global Management Inc. (NYSE: APO), Blackstone Inc.. (NYSE: BX), Oracle Corp.. (NYSE:ORCL), Coinbase Global Inc.. (NASDAQ: CURRENCY), and bitcoin (CRYPTO: BTC) are up about 6%, while US small caps, followed by the iShares Russell 2000 ETF (NYSE:IWM) – up about 13%.
That divergence may seem modest, but historically that’s how regime changes begin: slowly and then suddenly.
The expert indicates that a series of macroeconomic and political changes are supporting this rotation. As inflation surprises tilt to the downside and the adoption of artificial intelligence (AI) cools the labor market, pressures on affordability – in energy, healthcare, credit, housing and electricity – have come to the political forefront.
Hartnett said the team remains long Main Street and short Wall Street until Trump’s approval rating on policies focused on affordability increases.
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A key risk lies with former market leaders, as Hartnett warns of a shift from asset-light to asset-heavy business models.