Bank of America CorpBAC
Mentioned
Impact on stocks 1
Financials
Bank of America CorpBank of America CorpBank of America has shifted its preference within small and mid-cap equities for the second half of 2026, now favoring mid-caps over small-caps after the Russell 2000 surged 21% in the first half. Analyst Jill Carey Hall said the case for small-cap outperformance has diminished, citing increased risk of Federal Reserve rate hikes, with every 25 basis point hike estimated to hit Russell 2000 operating earnings by roughly 2%. BofA economists now expect 75 basis points of hikes this year, with 25 basis points in each of September, October, and December, and the Fed on hold in 2027, posing the most refinancing risk for small caps. Mid-caps trade at similar valuations to small-caps with comparable expected second-half earnings accelerations, but have the strongest guidance and revision trends. The bank prefers Value over Growth, noting Value typically leads during earnings recoveries and remains cheap relative to Growth in both segments, and urges a tilt toward Quality within small caps where low-quality outperformance recently hit a three standard deviation extreme close to February 2000 levels, while leveraged stocks with refinancing risk should be avoided.
Bank of America Corp