'long Main Street, Short Wall Street': Bofa Says Small Stocks Will Keep Beating Bigger Names

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• Bank of America says Main Street plays are poised to win ahead of the midterms.
• The bank says Trump's policies have weighed on certain market sectors.
• It flagged a handful of assets that are poised to "boom" as market leadership shifts.

Bet on Detroit, not Davos.

That's the message from Bank of America, which sees a "major threat" to the market leadership of the early 2020s. The bank said investors should gravitate toward Main Street plays as the midterm elections approach.

"[F]lip from asset-light to asset-heavy business model suggests major threat to 2020s market leadership of Big Tech/Magnificent 7," analysts led by Michael Hartnett wrote on Friday, adding that AI capex means hyperscalers are "no longer the best balance sheets, no longer the biggest stock buybacks."

The bank said that investors should focus on "Main Street plays" that were unloved earlier in the decade, such as small-cap stocks, emerging markets, and REITs.

BofA said that President Donald Trump's increasing focus on affordability for US consumers has weighed on many sectors of the market, including banks and Big Tech, and that investors should buy small and mid-caps, which should keep rallying into election season.

"Aggressive intervention to reduce price of energy, healthcare, credit, housing, electricity via Big Oil, Big Pharma, Big Banks, Big Tech means small & mid-cap best play for 'boom' on Main St in run-up to US midterms," he added.

Hartnett's advice comes as market rotation gathered steam this week. Investors dumped AI-exposed names amid a fresh scare over Anthropic's new tools and piled into value stocks across sectors.

Other finance pros have touted the potential of small-cap stocks, with the Russell 2000 up about 6% in 2026 compared to the S&P 500's gain of less than 1%.

"We are long Main St, short Wall St until Trump approval rating up on policy pivot to address affordability," Harnett wrote.