BofA: Movement in S&P 500 has broadened out after Big Tech-led rally early in the year
mbbirdy
Wall Street's 2023 rally has been fueled by a narrow group of mega cap stocks. However, Bank of America's equity and quant strategy team argued Friday that movement in the S&P 500 (SP500) is beginning to broaden out.
Year-to-date, the S&P 500 has advanced by 17.7%, thanks in large part to seven important household stock names. Shares of Apple (AAPL), Microsoft (MSFT), Google (GOOG) (GOOGL), Amazon (AMZN), Nvidia (NVDA), Meta Platforms (META), and Tesla (TSLA) have been the key supporting factors for the rise in the benchmark index.
So far in 2023, AAPL has advanced by 54.2%, MSFT climbed 32.3%, while GOOG/GOOGL gained 33.3%. At the same time, AMZN rose 51.4% and NVDA exploded by 217.9%. Moreover, META and TSLA jumped 142.5% and 143.2%, respectively.
However, these names now trade at 44x trailing EPS compared to the remainder of the index names at 17x, Bank of America noted. Still, the firm stated in an investor note that âthe S&P 500 has broadened out since May and we expect this to continue.â
It should also be noted that the seven names that have fueled the bulk of the S&P 500 rally in 2023 also represent roughly 27% of the index's moves. For investors that may be looking for a more balanced approach to the broader index, they may look towards the Invesco S&P 500 Equal Weight ETF (NYSEARCA:RSP) which offers equal weighted exposure amongst all of the S&P 500 constituents. Moreover, on a year-to-date stance RSP is +9%.
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