There are no bears in US stocks: the historic dangerous window of the midterm elections opens, and August to October may experience significant fluctuations

Comparative news, Bank of America's latest global fund manager survey shows that global fund managers' allocation of stocks has risen to the highest level in nearly five years, and market consensus is highly congested. Net 56% of respondents overpaid stocks, the highest since November 2021, and cash positions fell to an all-time low of 3.5%.

Michael Hartnett, chief investment strategist at Bank of America, pointed out that the current market has formed a highly consistent expectation that there will be no macroeconomic landing, no interest rate hike by the Federal Reserve, no AI capital expenditure cuts, no big victory for the Democratic Party, and no bears. He believes that current positions are more suitable for withdrawing or rotating within risky assets rather than continuing to expand overall risk exposure.

According to the survey, 72% of respondents do not expect the Federal Reserve to raise interest rates before the November midterm elections, and 71% do not expect hyperscale cloud computing companies to cut AI capital spending this year. However, the AI bubble has been listed as the biggest tail risk, and capital expenditure for hyperscale cloud computing companies is considered the most likely source of credit incidents.

Meanwhile, BTIG's chief market technology strategist Jonathan Klinsky warned that August 18 to October 11 is usually one of the hardest stages of market performance in the US midterm election year. Historical data shows that since 1990, with the exception of 2006, the S&P 500 has experienced a decline of at least 7% between August and October of every midterm election year.

Currently, S&P has risen more than 13% in 500 years and is at an all-time high, while US 10-year and 30-year Treasury yields have risen above 4.7% and 5.2% respectively, and rising energy prices and financing costs may further put pressure on the stock market. Klinsky advises investors to reduce their risk exposure or hedge against this historically high-risk window.