**[Bank of America Warning: If the Fed Cuts Rates Dovishly Next Week, the "Santa Claus Rally" May Be Derailed]** BlockBeats News, December 5 – Bank of America strategists stated that if the Federal Reserve adopts an overly cautious economic outlook next week, the year-end stock market rally could be at risk. Currently, the S&P 500 Index (SPX) is approaching its all-time high, and investors are optimistic about the best-case scenario of "Fed rate cuts, declining inflation, and resilient economic growth." However, Bank of America strategist Michael Hartnett noted in a report that if the Fed sends a dovish signal at next week's meeting, it could challenge this optimism—because it might imply that the economic slowdown is worse than expected. "The only thing that could stop the Santa Claus rally is a dovish Fed rate cut triggering a sell-off in long-term U.S. Treasuries," Hartnett wrote in the report, referring to "long-term" as longer-maturity U.S. government bonds. The S&P 500 Index is currently only about 0.5% away from its October peak, and seasonal trends typically favor a year-end rally. However, due to the government shutdown, key employment and inflation data scheduled for release later in December will be delayed, presenting two major risk events for the market. Hartnett and his team also pointed out that the U.S. government might intervene to prevent inflation from remaining high and unemployment from rising to 5%. They suggested that to prepare for this possibility, investors could allocate to "undervalued" mid-cap stocks for 2026.