(Bloomberg) -- Bank of America Corp. strategists expect US stock-market outperformance to continue to fade after a relentless run was halted in the early part of 2025.
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Equity markets including Brazil, Germany, the UK, China and Canada have all yielded higher returns than Wall Street’s S&P 500 year to date, noted strategists including Michael Hartnett. That’s as the so-called Magnificent Seven technology firms fail to provide the impetus they have done for so long.
Read: Magnificent Seven’s Slowing Growth Threatens S&P 500 Rally
The BofA strategists also point to a fading narrative around a US economy that’s structurally outpowering its rivals, as well as investors betting on geopolitical stability in the Middle East and Ukraine.
They recommend being long Chinese equities as they’re not expecting an escalation of the trade-and-technology war with the US.
Hartnett’s team says that beyond Wall Street, stocks in most regions are “frontrunning peak US exceptionalism.” However, they warned investors may take profits on European shares following the German election in a few weeks’ time, and if peace talks between Russia and Ukraine begin this month or next.
On bonds, BofA expects Treasury yields to fall below 4% as President Donald Trump looks to tackle government spending and stop debt spiraling, while also seeking approval in Congress for his tax cuts.
Money market funds drew in $46.8 billion in the week through Feb. 5, with $16.6 billion going into bonds and $600 million leaving stock funds, BofA added, citing EPFR Global data.
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