(Bloomberg) — Investors betting that technology behemoths will continue to fuel the rally in equities could be in for a rough ride when other sectors start to catch up, according to strategists at Bank of America Corp.

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The outperformance of value over 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 sore points on the horizon include a drop in US equities and a widening in investment-grade bond spreads, Galou said by email.

The strategists have taken a more neutral stance on the rally that has powered the S&P 500 Index to a record this year after being broadly bearish in 2023. Gains have largely been driven by a surge in tech mega-cap stocks, which recently got an extra boost from a robust earnings report from Nvidia Corp. Data from Goldman Sachs Group Inc.’s prime brokerage this week showed that hedge funds’ exposure to Big Tech is at an all-time high.

Meanwhile, the S&P 500 Value Index is up less than 4% this year, compared to a 15% rally in its growth counterpart. The S&P 500 equal-weighted index — which dilutes the impact of the tech mega-caps — is trading at the lowest level since 2009 relative to the benchmark, according to data compiled by Bloomberg.

–With assistance from Thyagu Adinarayan.

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