BofA noted that investors are pouring money into US equities at a near-record pace, positioning for potential lower borrowing costs, reduced tariffs, and tax cuts in 2026.

Citing EPFR Global data, the bank reported a $78 billion inflow into US stocks for the week ending December 17—the largest weekly inflow since the record $82.2 billion surge a year ago.

The tech sector contributed to inflows for the first time in three weeks, suggesting easing concerns over potentially overstretched valuations in AI-related stocks.

This sentiment has yet to translate into sustained momentum for the S&P 500, which rebounded in late November but has since largely traded sideways. BofA’s Bull & Bear Indicator now signals an "extreme" bullish stance for equities overall, triggering a contrarian sell signal for risk assets. The benchmark US stock index is on track for a second consecutive weekly decline.

Despite this, strategists—including Goldman Sachs’ Ben Snider—remain bullish on US equities. His team projects a 12% rise in the S&P 500 by 2026, supported by robust economic growth and a weaker dollar.

BofA strategist Michael Hartnett observed that equity bulls are betting on a "hot" economy next year, anticipating declines in interest rates, tariffs, and taxes.

Within equities, investors are accelerating their shift toward passive funds. ETF inflows hit a record $145 billion for the week ending December 17, bringing year-to-date inflows to $1.4 trillion.

Meanwhile, active equity funds saw continued outflows, with a record $605 billion withdrawn year-to-date.

AI stocks may remain in focus next year, especially after Oracle’s disappointing data center ambitions. Even minor setbacks could reignite bubble concerns in certain segments of the AI trade.