'Stay Long Detroit, Short Davos': Why BofA's Hartnett Sees A Main Street Boom Ahead Of The Midterms

Core Message - Bank of America's top investment strategist Michael Hartnett advocates for a shift in investment strategy, favoring Main Street over global elites as market dynamics change due to cooling inflation, AI disruption, and political pressures ahead of the U.S. midterms [1][2] Investment Strategy - Hartnett suggests investors should "stay long Detroit, short Davos," indicating a preference for U.S. small and mid-cap stocks, banks, REITs, emerging markets, and international equities over major tech companies [1][2] - The "Bro Billionaire" basket, which includes companies like Nvidia, Meta, and Tesla, has only increased by approximately 6% since January 2025, while U.S. small caps have risen closer to 13% [4] Market Dynamics - A quiet rotation is occurring in the market, with assets that were previously underperforming during the bond bear market now starting to outperform elite "Davos" trades [3] - The divergence in performance between small caps and big tech may seem modest but historically indicates the beginning of regime changes in the market [5] Economic and Political Context - Hartnett highlights that macroeconomic and political shifts are driving this rotation, with inflation surprises trending downward and AI adoption impacting the labor market, leading to increased affordability pressures in various sectors [5] - The focus on affordability in energy, healthcare, credit, housing, and electricity is becoming a significant political issue [5] Future Outlook - The investment strategy remains long on Main Street and short on Wall Street until there is an improvement in Trump's approval rating regarding affordability-focused policies [6] - There is a potential risk for former market leaders as a shift from asset-light to asset-heavy business models is anticipated [6]