The S&P 500 is up 15.7% so far this year, largely driven by a rally in a handful of mega-cap growth stocks such as Nvidia (NVDA.O) and Meta (META.O) that have ridden the artificial intelligence (AI) boom.
While the rally has been moderating, BofA remains in "neutral" to "positive" territory on U.S. stocks, with a bias towards equal-weighted stocks, strategists led by Savita Subramanian said.
An equal-weight index assigns uniform weights to each constituent, unlike a market capitalization-based index, like the S&P 500, where bigger companies tend to have an outsized influence.
Equal-weighted stocks have less volatile earnings, smaller differences in analysts' estimates, and are cheaper and less crowded than growth stocks, Subramanian said.
While a "fresh wave of bear narratives around equities have emerged", BofA says the "old economy", which includes value stocks - more prevalent in the equal-weighted S&P 500 - could benefit as much as tech and growth.
Persons:
Andrew Kelly, Savita Subramanian, Subramanian, BofA, Morgan Stanley, Susan Mathew, Savio D'Souza
Organizations:
Dow Jones, New York Stock Exchange, REUTERS, Street, Nvidia, Tech, Thomson
Locations:
Manhattan , New York City, U.S, Bengaluru