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Skip NavigationMarketsBusinessInvestingTechPolitics & PolicyVideoWatchlistInvesting ClubPROLivestreamMenuThe near-term case against stocks is growing, according to Bank of America. Strategist Michael Hartnett laid out four reasons why the bank is taking a “risk-off” approach for the next month: Higher yields and the “need for [the Federal Reserve] to hike on Oct. 28;” Elevated oil prices due to the wars in the Middle East and Ukraine; “Rising risk of ‘wave-like’ [Democratic] sweep midterms;” The recent price action in artificial intelligence-linked names Treasury yields, while they pulled back this week, remain near multi-decade highs as inflation stays well above the Fed’s 2% target. The consumer price index rose 3.7% in September from the year-earlier period. The producer price index, a wholesale inflation measure, increased by 6.3% last month — its biggest annual gain since 2022 . Traders are also pricing a more than 77% chance that the Fed will raise its overnight rate by at least 25 basis points before year-end, according to the CME Group’s FedWatch tool. BofA’s Hartnett expects the central bank to be even more aggressive. “We expect a Fed Oct hike to restore credibility (66 consecutive months CPI has been above Fed’s 2% target) to reduce long-end Treasury yields another 20bps in coming weeks, limiting downside for risk assets so long as AI financing fears abate,” he said. Traders also increasingly expect Democrats will gain control of Congress in the upcoming midterm election. Kalshi traders see a 90% chance of Democrats coming out of the Nov. 3 election with a majority in the House and a 63% probability they will emerge as the Senate’s controlling party. On top of all of that, the AI trade faltered this week amid growing concerns that some companies are issuing too much debt to build out their AI networks. CoreWeave has tumbled more than 22% this week, while the VanEck Semiconductor ETF is down 9%. Hartnett advised clients add exposure to “‘peak yield’ beneficiaries” such as small cap stocks, REITs and consumer discretionary stocks. Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.Read More