We could see an economic boom from all the pent-up capital, says BofA's Savita Subramanian

Market Sentiment & Positioning - US equity market is near its highs, but investor sentiment isn't extremely bullish or bearish [1][2] - Broker allocation recommendations for stocks are at 56%, suggesting investors are gradually entering the market with significant cash reserves [3] - The market is primed to expect negative events due to strong returns against a challenging macro environment [10] Monetary Policy & Investment Strategy - Potential Fed rate cuts could drive rotation from cash to yieldier equities in the S&P 500 [4][5] - Stocks are favored over bonds due to the current environment [5] - Real returns on cash and bonds are not favorable compared to inflation [5] Corporate Performance & Economic Activity - Companies have demonstrated the ability to navigate policy uncertainty, maintaining transparency and handling tariffs [6][7] - Companies delayed, rather than cancelled projects due to tariffs, indicating pent-up economic activity [8] - Wage inflation may be cooling, which is beneficial for corporate profits [10] - S&P 500 companies are well-capitalized with long-term, fixed-rate, low levels of debt, resulting in healthy balance sheets [11] Risks & Opportunities - Country risk remains a primary concern, while equity risk premium is relatively low [6] - Over-optimism and high capital expenditure in AI sector could lead to disappointments [12] - A 5% to 10% pullback is likely, but a bare market and recession are not the base case [13] - Potential economic boom driven by pent-up capital spending on infrastructure, power grid, and construction in the US [14]