Experts at Bank of America Corp. view the success of Republicans in the midterm elections and the Texas gubernatorial race as a catalyst for a powerful rise in the stock market. This conclusion is presented by Bloomberg.
A group of analysts led by Michael Hartnett argues that a convincing victory for Donald Trump’s party in November and Greg Abbott’s retention as Texas governor will be particularly positive signals for the artificial intelligence sector. The midterm elections are considered a serious source of risk for American stocks, and it is this volatility that prompts Goldman Sachs expert Snyder to advise buying volatility indexes ahead of the vote.
“If Republicans maintain control of the Senate and Abbott remains governor of Texas, expect a sharp rise in stocks, especially those of companies in the AI sector in 2027,” — predicts Hartnett.
However, if Democrats win and Abbott leaves office, stock declines could exceed 10%. This would also negatively impact the dollar and bond yields by the end of the year.
For Bank of America strategists, the Abbott vs. Democrat Gina Hinojosa race in Texas is a kind of “referendum” on the construction of AI data centers. The state already has 335 such facilities, with plans for another 247 to be built. Analysts emphasize that Abbott’s decision to temporarily freeze the expansion of the data center network is due to rising energy prices and “voter concerns” about the strain on the power grid.
This month, it is the tech giants that have driven the S&P 500 index to record highs. The reason was a sharp increase in demand for shares of semiconductor manufacturers and other AI sector companies following a recent downturn. The results of corporate reports for the second quarter exceeded even the most optimistic forecasts.
According to Bloomberg Intelligence, the profits of companies included in the S&P 500 index were 32% higher than expectations before the start of the reporting season. At the same time, 93% of tech companies reported better results than forecasts.
Hartnett’s team believes that bullish sentiment in the market could strengthen even further. The foundations for this are rapid profit growth, an increase in total wealth by $10 trillion in 2026, and projected investments in the AI sector of over $1 trillion in 2027. “Restraining factors include rising bond yields, the strengthening of socialist sentiments among voters, and the potential for further growth,” — analysts summarize.
