BofA Hartnett: U.S. stocks are unusually strong by historical standards, and gold is expected to rise as much as 30% this year.

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The US stock market and gold are jointly heading toward a rare fourth consecutive year of double-digit gains, a historically strong trend that has drawn significant attention from Wall Street’s top strategists.

According to Bloomberg, a team led by Michael Hartnett, Chief Investment Strategist at Bank of America, points out that the S&P 500 is expected to record an annualized gain of 20%, while gold could achieve a 30% annual rise, and such sustained, large-scale market moves are extremely rare in history.

As for US stocks, similar sustained large-scale increases have only happened three times: during World War II, in the postwar peace dividend period, and during the 1995-1999 tech bubble. Gold’s long-term strong performance was mainly concentrated in the stagflation era of the 1970s.

In terms of market performance, both the Nasdaq and S&P 500 have recently hit record highs. The S&P 500 started the year at 6,858 points and has climbed as high as 7,394 points, up approximately 7.8%. The Nasdaq began the year at 23,236 points, reaching a high of 26,144 points, for a cumulative rise of about 12.5%.

On the gold side, the spot price of gold at the start of the year was $4,332 per ounce. Based on Bank of America's forecast for a 30% annual gain, that sets a target price at $5,631.6 per ounce. Although gold recently pulled back to $4,734 per ounce, its highest point this year nearly reached its historic peak of $5,598.8 per ounce, just a step away from the theoretical target, with a gap of about $32.8.

From a market impact perspective, the Hartnett team’s latest view is: small-cap stocks, emerging markets, and commodities have all reached a "bullish long-term turning point," and the materials sector has been singled out as the next strong performer.

Market Rotation Accelerates, Materials Sector Becomes the Next Leading Role

In recent years, the strong performance of US stocks has mainly been driven by mega-cap technology companies. The AI capital spending boom is the core driver of the latest rally, with extremely high concentration and a few stocks accounting for most of the gains.

However, market breadth is improving, and other sectors and asset classes are also showing a more pronounced upward trend. Small-cap stocks, emerging market equities, and commodities are all seen by the team as being at a “bullish long-term turning point,” underpinned by the resilience of the US economy. Market consensus forecasts indicate US nominal GDP growth could reach 5.5% this year, with corporate profit growth expected at 20%, providing a fundamental basis for broader market gains.

In terms of specific sector allocation, Bank of America’s team sees the materials sector as the next strong area set to emerge. Currently, materials account for only about 2% of the S&P 500, at their lowest level in nearly 30 years. The Hartnett team believes this pattern is about to change. The driving factors cover several dimensions: geopolitically driven resource competition, rising global military spending, material demand driven by the AI capital spending boom, and demand for construction materials as countries address housing shortages.

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