Huan Qiu Wang·2025-09-20 02:06Core Viewpoint - The Bank of America team, led by strategist Michael Hartnett, believes that investors should prepare for the continued rise of the "Magnificent Seven" stocks (Tesla, Google, Apple, Meta, Amazon, Microsoft, and Nvidia) as their valuations and price increases have not yet reached historical peak levels [1][4]. Valuation Analysis - Current valuation indicators for the "Magnificent Seven," including price-to-earnings ratios and deviations from key technical moving averages, suggest there is still upward potential [4]. - Historical data shows that major market bubbles have seen average price increases of 244% from bottom to peak, while the "Magnificent Seven" has risen 223% since its March 2023 low, indicating further upside potential [4]. - The current price-to-earnings ratio for the "Magnificent Seven" is 39 times, compared to historical bubble peaks where it typically reached 58 times, and the price is only 20% above the 200-day moving average, compared to historical peaks of 29% [4]. Market Sentiment and Macro Environment - Positive macroeconomic conditions, ongoing enthusiasm for artificial intelligence technology, and expectations of further interest rate cuts by the Federal Reserve are key factors supporting the rise of tech stocks [5]. - The S&P 500 Information Technology Index has increased by 56% since its low in April 2023, with investors consistently buying during pullbacks [5]. - A recent Bank of America fund manager survey indicated that "going long on the Magnificent Seven" is viewed as the most crowded trade, with 42% of respondents agreeing, reflecting characteristics typical of historical bubbles [5]. Investment Strategy - While optimistic about the continuation of the tech stock bubble, the Bank of America team advises investors to adopt a more balanced strategy to manage risk [5]. - The recommended "barbell strategy" involves holding large-cap tech stocks while also allocating some investments to "bad value stocks" to achieve a balance between risk and return [5].