Bank of America strategist Mike Hartnett told clients that U.S. small- and mid‑cap stocks present the strongest upside as the 2024 midterm elections approach. With technology heavyweights such as Apple and Microsoft under pressure, investors can find better risk‑adjusted returns in the broader mid‑cap universe for portfolio diversification over the next twelve months.

Tech giants have seen valuations compress after the Federal Reserve’s aggressive rate hikes and mixed earnings, prompting a rotation toward sectors like industrials and consumer discretionary where mid‑caps dominate. Election‑year volatility often penalizes high‑growth names, making the midterm backdrop a catalyst for broader market rebalancing in the coming weeks.

Investors should monitor the Bank of America mid‑cap index performance and any shifts in fund flows toward ETFs tracking the Russell 2000. Upcoming policy debates on infrastructure spending and corporate tax rates could further buoy the segment. A surprise election outcome would test Hartnett’s thesis on mid‑cap resilience.