--- title: "BofA's Hartnett: Materials Sector to Be the Next \"Bull Market Darling\"" type: "News" locale: "en" url: "https://longbridge.com/en/news/285828456.md" description: "BofA strategist Hartnett points out that the materials sector currently accounts for only 2% of the S&P 500's market capitalization, with valuations at a 30-year low. Multiple drivers include geopolitical resource competition, AI capital expenditure, defense expansion, and the U.S. housing shortage. He proposes a \"Bubble Barbell Strategy,\" recommending simultaneous long positions in AI chips and oversold cyclical assets, with the materials sector being the optimal pairing" datetime: "2026-05-10T04:12:28.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/285828456.md) - [en](https://longbridge.com/en/news/285828456.md) - [zh-HK](https://longbridge.com/zh-HK/news/285828456.md) --- # BofA's Hartnett: Materials Sector to Be the Next "Bull Market Darling" Michael Hartnett, Chief Investment Strategist at Bank of America Securities, highlighted the materials sector in his latest report, calling it the next "bull market darling." In the report, Hartnett pointed out that **global geopolitical competition for resources, the surge in AI capital expenditure, skyrocketing defense spending, and the U.S. housing shortage are collectively driving the materials sector into a long-term upward inflection point.** **The materials sector currently accounts for only 2% of the S&P 500's market capitalization, near a 30-year low, showing significant characteristics of a valuation trough.** Meanwhile, he noted that U.S. stocks have an annualized gain of 20%, while gold has an annualized gain of 30%. This combination has historically only appeared during periods of war, peace, bubbles, and stagflation, often signaling the accumulation of deep structural risks. ## Dual Rally in Stocks and Gold Points to Coexisting "Bubble Stagflation" Hartnett noted that U.S. stocks are on track for their fourth consecutive year of double-digit gains, with an annualized return of approximately 20%; gold has also seen an annualized gain of about 30% over the same period, marking its fourth consecutive year of double-digit increases. Hartnett pointed out that **U.S. stocks** achieving double-digit gains for four consecutive years has historically only occurred during wartime (1942–1945), peacetime (1949–1952), and bubble eras (1995–1999); **Gold** achieving double-digit gains for four consecutive years has only been seen during stagflation periods (1971–1974 and 1977–1980). **The simultaneous occurrence of both leads Hartnett to characterize the situation as "bubble-like war and peace superimposed on stagflation."** On the macro level, Hartnett observed that since November 2023, the pace of rate hikes by central banks in developed markets has exceeded the pace of rate cuts for the first time. At the same time, although emerging markets remain in a cycle dominated by rate cuts, the margin by which cuts exceed hikes has narrowed to its smallest level since August 2023. **He further pointed out that the NYSE Composite Index (which he views as Wall Street's best barometer) faces technical pressure from a "double top" pattern in the coming weeks, which is an "important signal" that central banks are rapidly turning hawkish to cope with nominal economic prosperity.** ## "Bubble Barbell" Strategy: Materials as the Optimal Pairing Choice **Hartnett proposed the "Bubble Barbell Strategy" framework, which involves going long on both "euphoric assets" and "shunned assets."** The former corresponds to the current AI and chip sectors, while the latter refers to cyclical assets that are out of favor, oversold, and will be boosted by the final wave of the nominal GDP bubble. **Under this framework, Hartnett believes the materials sector is the optimal target to pair with chip euphoria, while consumer, Chinese, and UK assets also have pairing potential; bonds, which have been neglected by the market, do not fit the above logic.** The core logic driving his bullish view on the materials sector covers multiple dimensions: > - Intensified competition among nations for natural resources under the global geopolitical landscape; > > - AI infrastructure capital expenditure reaching $750 billion and continuing to rise; > > - Global defense spending approaching $3 trillion; > > - The U.S. housing shortfall exceeding 4 million units; > > - And the "implicit appreciation" of the RMB exchange rate. > > > Technical analysis also provides support, with the Steel ETF currently testing historical highs last seen before the 2008 financial crisis. ## AI Giants' Valuations Approach Historical Bubble Peaks Regarding top AI-related assets, Hartnett issued a warning: the top ten AI targets now account for 40% of the total market capitalization of the S&P 500, with concentration levels approaching those seen during the "Nifty Fifty" era of the 1970s, the Japanese stock market of the 1980s, and the peak of the internet bubble in the 1990s. However, it has not yet reached the extreme levels of the railway stock bubble of the 1880s. On how this boom or bubble might end, Hartnett cited historical patterns, pointing out that a sharp rise in bond yields is the key trigger: > - A 200 basis point rise in U.S. Treasury yields ended the "Nifty Fifty" bubble; > > - A 230 basis point rise in Japanese government bond yields burst the Japanese bubble; > > - A 260 basis point rise in U.S. Treasury yields in 1999 brought the internet bubble to an end. > ### Related Stocks - [PICK.US](https://longbridge.com/en/quote/PICK.US.md) - [GDX.US](https://longbridge.com/en/quote/GDX.US.md) - [IYM.US](https://longbridge.com/en/quote/IYM.US.md) - [SIL.US](https://longbridge.com/en/quote/SIL.US.md) - [XLB.US](https://longbridge.com/en/quote/XLB.US.md) - [XME.US](https://longbridge.com/en/quote/XME.US.md) - [SMH.US](https://longbridge.com/en/quote/SMH.US.md) - [GDXJ.US](https://longbridge.com/en/quote/GDXJ.US.md) - [BAC.US](https://longbridge.com/en/quote/BAC.US.md) - [.SPX.US](https://longbridge.com/en/quote/.SPX.US.md) - [SLX.US](https://longbridge.com/en/quote/SLX.US.md) - [BAC-Q.US](https://longbridge.com/en/quote/BAC-Q.US.md) - [BML-L.US](https://longbridge.com/en/quote/BML-L.US.md) - [BAC-L.US](https://longbridge.com/en/quote/BAC-L.US.md) - [BAC-K.US](https://longbridge.com/en/quote/BAC-K.US.md) - [BML-H.US](https://longbridge.com/en/quote/BML-H.US.md) - [BAC-N.US](https://longbridge.com/en/quote/BAC-N.US.md) - [BAC-E.US](https://longbridge.com/en/quote/BAC-E.US.md) - [MER-K.US](https://longbridge.com/en/quote/MER-K.US.md) - [BAC-O.US](https://longbridge.com/en/quote/BAC-O.US.md) - [BML-G.US](https://longbridge.com/en/quote/BML-G.US.md) - [BAC-M.US](https://longbridge.com/en/quote/BAC-M.US.md) - [BAC-B.US](https://longbridge.com/en/quote/BAC-B.US.md) - [BML-J.US](https://longbridge.com/en/quote/BML-J.US.md) - [BAC-S.US](https://longbridge.com/en/quote/BAC-S.US.md) - [BAC-P.US](https://longbridge.com/en/quote/BAC-P.US.md) - [8648.JP](https://longbridge.com/en/quote/8648.JP.md) ## Related News & Research - [MP Materials Q1 revenue rises 49%, beats estimates](https://longbridge.com/en/news/285619248.md) - ['We are American': Acerinox considers NYSE listing for US arm](https://longbridge.com/en/news/285708571.md) - [Btg Pactual Comments on HudBay Minerals FY2029 Earnings](https://longbridge.com/en/news/285736741.md) - [Lynas CEO says US, Europe rules sway buyers from Chinese rare earths](https://longbridge.com/en/news/285308738.md) - [Century Aluminum Q1 sales and EBITDA beat estimates on higher realized prices](https://longbridge.com/en/news/285618922.md)