Bank of America Says U.S. Stocks Could Fall More Than 10% Under Democratic Sweep Scenario Including Texas

Bank of America says U.S. stocks could fall more than 10% by year-end 2026 if Democrats win both chambers of Congress and take the Texas governor’s office, a scenario that also threatens AI shares, the dollar and bond yields.

The 2026 federal general election is scheduled for Nov. 3. The detailed market scenario combines Democratic control of the House and Senate with a Democratic victory in Texas.

The scenario includes a weaker U.S. dollar, lower bond yields and a possible reversal in the AI trade. Its logic centers partly on how policymakers handle AI infrastructure, including the cost of expanding data centers and pressure on electricity demand.

The Texas governor’s race is included because Texas is a major location for data-center development. The state’s policy direction could therefore affect the investment environment surrounding AI infrastructure and related growth stocks.

Michael Hartnett, chief investment strategist at BofA Global Research, said, “The perceived AI bubble could get a lot bigger, because it’s now a government-sponsored bubble and strategic policy.”

Bank of America’s alternative scenario involves a Republican Senate victory and the re-election of Texas Gov. Greg Abbott. That outcome could extend the stock rally, particularly among AI-related shares, into 2027.

The scenarios remain conditional on the election results. The more-than-10% decline applies to the stock market outcome described in the Democratic sweep case; the analysis does not quantify the dollar or bond-yield moves.