Why BofA’s Hartnett Sees Main Street Boom Ahead of Midterms

Chief Investment Strategist at Bank of America 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 US session averages.

The expert made a bold call in his latest Flow Show report: Investors should “stay long Detroit, short Davos,” favoring small- and mid-caps, banks, REITs, emerging markets and international stocks over the so-called Magnificent 7 and other Big Tech giants.

Hartnett’s main message is that markets are beginning to set a political and economic price towards accessibility.

This change matters.

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Assets punished during the great bond bear market of the early 2020s are quietly outperforming the elite “Davos” trades that dominated portfolios for years.

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:TARGET), Palantir Technologies Inc. (NYSE:PLTR)Tesla Inc. (NASDAQ:TSLA), ARK Innovation ETF (NYSE:SHEET), Apollo Global Management Inc. (NYSE:APO), Blackstone Inc. (NYSE:BX), oracle corp. (NYSE:ORCL), Coinbase Global Inc. (NASDAQ:COIN), i Bitcoin (CRYPTO: BTC) have increased by approximately 6%, while US small caps, followed by iShares Russell 2000 ETF (NYSE:IWM) – are closer to 13%.

This divergence may seem modest, but historically this is how regime changes begin: slowly, then suddenly.

The expert indicates that a series of macroeconomic and political changes underpin this rotation. With inflation surprises tilted to the downside and the adoption of artificial intelligence (AI) cooling the labor market, pressures on affordability of energy, healthcare, credit, housing and electricity have moved to the political forefront.

Hartnett said the team will remain long Main Street and short Wall Street until Trump’s approval rating rises on a policy focused on affordability.

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A key risk lies with former market leaders, as Hartnett warns of a shift from light to asset-heavy business models.

AI hyperscalers are expected to spend $670 billion in capex in 2026, consuming 96% of their cash flow, compared to roughly $150 billion or 40% of their cash in 2023.

This changes everything.

The leaders of the 2020s, the Magnificent Seven, are no longer the cleanest balance sheets on the market.

They are no longer the biggest repurchase engines.

According to Hartnett, Wall Street is not abandoning AI, but is rotating from consumers of AI to beneficiaries of AI, from services to manufacturing, from hype to cash flow.

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Hartnett sees a historical pattern where major global events trigger long-term shifts in market leadership.

From gold after Bretton Woods to bonds in the Volcker era, US stocks during globalization, commodities after China’s entry into the WTO, and megacap tech after COVID, leadership has constantly rotated after major events.

He sees 2025 as the next turning point, marking a shift from American exceptionalism to global rebalancing.

In this new cycle, Hartnett expects US small- and mid-cap stocks, financials, regional banks, REITs and real assets to outperform, along with international stocks, China’s consumer sector and emerging market commodity producers.

Conversely, he warns that the leaders of highly valued, asset-light Big Tech face increasing risk as capital turns to more traditional, income-generating parts of the economy.

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This article ‘Stay Long Detroit, Short Davos’: Why BofA’s Hartnett Sees Main Street Boom Ahead of Mid-Term Sessions originally appeared Benzinga.com

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