Bank of America warned of "policy shift bubble": $164 billion flowed into US stocks, interest rate cuts + tax cuts may spawn huge risks.

Michael Hartnett, a strategist at Bank of America, pointed out that with the market's expectation of a rate cut by the Federal Reserve attracting a massive influx of funds into the stock market, the risk of a speculative bubble in the US stock market is constantly increasing. As negotiations between the US and China and other trading partners near a trade agreement, concerns about the trade war and geopolitical factors are gradually decreasing in the minds of investors. Instead, the market is betting on the greater likelihood of a rate cut by the Federal Reserve and waiting to see if President Donald Trump's tax cut bill can pass in Congress next month. Hartnett's team wrote in a report for Bank of America that the policy combination of shifting from tariff policies to tax cuts and rate cuts could create a high bubble risk in the second half of this year and lead to further weakness in the US dollar. The report cited data from EPFR Global showing that $164 billion has flowed into the US stock market so far this year, potentially setting the third-largest annual inflow in history. The S&P 500 index is currently approaching historical highs, while the yield on 10-year US Treasury bonds has declined by over 30 basis points from its May high. The futures market currently expects the Federal Reserve to cut interest rates four times in the next 12 months. Hartnett added, "The best investment strategy is to build a 'long US growth stocks/long global value stocks' barbell investment portfolio," which aims to balance risk and return. His team also pointed out that if there is no bubble in the field of artificial intelligence, faster profit growth could be the "most likely upside surprise" for the US and global stock markets in the second half of the year.