橙子Joyce

On August 14, Bank of America’s chief investment strategist Michael Hartnett’s team released a report stating that the midterm elections in mid-2026 may become a key turning point for the U.S. stock market’s AI rally. If the Republicans hold the Senate and Texas Governor Greg Abbott successfully wins re-election, the market may view it as a signal that AI capital expenditures and data-center expansion will continue; the U.S. market—especially the AI sector—could then strengthen further, and the rally may evolve into a “bubble-like” trend in 2027. Conversely, if the Democrats win both the Senate and the Texas governorship, AI investment and risk assets would face a repricing, and the U.S. stock market could see a sharp drop of more than 10%, with the U.S. dollar and bond yields also falling. Bank of America defines the Texas governor election as a referendum around “the cost of living and AI data centers”—Texas currently has 335 data centers, with another 247 in the planning stage.

The current bull logic still has fundamental support: S&P 500 earnings growth in Q2 reached 32%, and AI capital expenditures are expected to exceed $1 trillion in 2027. The U.S. stock market is up about 14% year-to-date, and market gains in AI industry supply-chain markets such as South Korea are even higher. However, market optimism is already highly crowded. Bank of America’s “bull and bear indicator” remains in the sell-signal range; private-client equity allocation rose to 66.4%, a record high; bond allocation fell to 17%; and cash allocation is only 9.4%, the lowest on record.

Bank of America believes that an overly high positioning does not necessarily mean the bull market is immediately over, but it makes the market more sensitive to unexpected negative surprises. The bond market is the biggest potential constraint: U.S. government debt is about to exceed $40 trillion. Interest spending over the past 12 months is about $1.4 trillion, and the yield on the 30-year U.S. Treasury recently climbed to 5.126%, a 25-year high. Ending a bull market for real typically requires excessive positioning, overly optimistic earnings, and tighter policy to occur at the same time. The first two conditions are already in place; the election outcome and the interest-rate path will therefore be the key variables in determining whether the bull market can shift from strong gains to a frenzy of bubble-like exuberance.

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