Bank of America unveils surprise 2026 stock-market forecast

Bank of America has revised its stock forecast for Amazon following a significant decline in the company's stock value, which has dropped approximately 8% over the past month despite a strong earnings report at the end of October. This decline is attributed to a broader sell-off affecting artificial intelligence stocks, including Nvidia, which has faced even steeper losses.

Bank of America (BofA) has forecasted an 'air pocket' in the market rather than an AI bubble, attributing this to the increasing debt levels associated with the rush to build data centers. BofA's strategy chief, Savita Subramanian, emphasized that while AI will not maintain its current dominance, the situation is not akin to the dot-com bubble of 2000.

Bank of America has adjusted its forecast for the Federal Reserve's interest rate cuts ahead of the upcoming FOMC meeting, reflecting ongoing concerns about high mortgage rates and housing prices that have sidelined many potential homebuyers. This adjustment comes amid a challenging economic landscape where mortgage rates remain significantly elevated compared to 2021 levels.

Bank of America has projected that the AUD/USD exchange rate will decline to 0.63 by the first quarter of 2026, attributing this forecast to ongoing economic weaknesses in China. This prediction reflects concerns over China's economic performance, which is expected to impact the Australian dollar negatively.

Michael Burry, known for his short-selling strategies, has publicly criticized Tesla's valuation in a recent Substack post, suggesting that the electric vehicle company's stock price is excessively high and unsustainable. This marks a return to Burry's scrutiny of major tech stocks, particularly Tesla, which he views as overvalued in the current market climate.

Bitcoin surged back above $90,000 on Tuesday, recovering from a significant selloff that had erased nearly $1 billion in leveraged bets, catching Wall Street off guard. This rebound provided a temporary relief amid a prolonged downturn in the cryptocurrency market, although traders remain cautious due to ongoing market stress.

Wall Street experienced a cautious rebound, with the S&P 500 managing to eke out a gain despite being stuck in a tight trading range. This comes after a rough start to December, where volatility had previously impacted investor confidence. The cryptocurrency market saw a rally, particularly with Bitcoin, which surged following a significant decline in its value earlier in the month.