(Bloomberg) — Investors betting that tech giants will continue to fuel rising stocks could find themselves in a tough spot when other sectors start to catch up, Bank of America Corp. strategists say.
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The outperformance of value stocks relative to growth stocks as market breadth improves could be the next “pain trade” for investors, strategists including Michael Hartnett and Elyas Galou wrote in a note. Other potential flashpoints on the horizon include a decline in U.S. stocks and a widening of investment-grade bond spreads, Galou said by email.
Strategists took a more neutral stance on the rally that helped the S&P 500 index hit a record this year after being broadly bearish in 2023. The gains were largely driven by a sharp rise in high-end technology stocks. capitalization, which recently obtained a supplement. boosted by a robust earnings report from Nvidia Corp. Data from prime brokerage Goldman Sachs Group Inc. this week showed hedge funds’ exposure to big tech hit a record high.
Meanwhile, the S&P 500 Value Index is up less than 4% this year, compared to a 15% rise for its growth peer. The equal-weighted S&P 500 index – which dilutes the impact of tech mega-caps – is trading at its lowest level since 2009 relative to the benchmark, according to data compiled by Bloomberg.
–With the help of Thyagu Adinarayan.
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