Bank of America: Bullish on small and mid-cap stocks as tech giants become less attractive

Glonghui, February 6th｜Bank of America strategists stated that as the appeal of tech giants declines, U.S. small and mid-cap stocks are the best allocation direction ahead of the midterm elections. The team led by Michael Hartnett pointed out that Trump’s “aggressive intervention” measures to lower energy, healthcare, credit, housing, and electricity prices are putting pressure on sectors such as energy giants, pharmaceutical companies, banks, and large technology firms. This makes small and mid-cap stocks the main beneficiaries of this round of “prosperity” as the midterm elections approach. Recently, investors, concerned about the impact of artificial intelligence, have accelerated the rotation out of tech stocks, seeking trading opportunities that are expected to benefit from the Trump administration’s efforts to reduce living costs. At the same time, a major category of companies that are more sensitive to improvements in economic growth prospects has also outperformed the broader market. Bank of America pointed out that the shift from “asset-light” to “asset-heavy” business models means the market dominance of the “Magnificent Seven” tech giants is facing a “significant threat.”