Hartnett says now Wall Street’s “last bull conviction standing” is expectations of a “boom,” which were the highest in BofA’s fund manager survey since February 2022. He lays out three 2027 scenarios, “bubble, breadth, bust”: ▪ Case for Bubble: “AI = railroads.” Add a US government backstop of AI, since higher stocks and bonds are how the US wins the AI war with China, plus Gen Z and Gen X’s “structural buy-the-dip ethos.” He says investor conviction in Bubble “has peaked,” with 50% of investors in BofA’s October survey predicting “no landing.” ▪ Case for Breadth: consensus forecasts a 40bp drop in Treasury yields and 15% S&P 500 earnings growth in ‘27, and “Goldilocks unlocks value” in small and mid-caps and the S&P 500 excluding AI. He says investor optimism in this scenario is “still high,” with 40% predicting a “soft landing.” ▪ Case for Bust: bonds and voters end booms and bubbles, and tighter credit means no AI boom. He sees downward revisions coming to ‘27 forecasts of 5% US nominal GDP and 45% global tech earnings growth (after 94% in ‘26). He says fear of a Bust is “too low,” with just 6% predicting a “hard landing.” In his words, “all the incoming FAQs are ‘should I add risk now?’ not ‘is this the big top?’” His call in the meantime: “sell oil, buy bonds, wait for lower oil prices & yields before adding risk bigtime.” WTI closed Friday at $90.83 and the 10-year Treasury yield at 4.86%. That compares with the $80 and 4.5% he says would end his risk-off stance.
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