Bank of America reported that stocks outperformed bonds and cash last month, reflecting investor appetite for risk, with indications that market leadership is extending beyond just mega-cap stocks.
The S&P 500 rose over 2% on a total return basis, compared with investment-grade corporate bonds up 1.06% and Treasury bills gaining 0.39%.
Gold led asset classes, climbing 3.95%.
The equal-weighted S&P 500 advanced 2.83%, surpassing the cap-weighted index, while the smallest 450 companies slightly outperformed the 50 largest by market cap. Global equities outside the U.S. also showed strength, with Japan and Europe posting the largest regional gains.
Sector performance was mixed: seven of the S&P’s 11 groups beat the broader index, including materials, healthcare, energy, and communications, while technology, utilities, industrials, and consumer staples lagged.
Value stocks gained 3.19%, outpacing growth at 1.12%, narrowing growth’s year-to-date lead to roughly one percentage point. BofA suggested that value may continue to lead as the cycle moves toward recovery, supported by cheaper valuations and lighter positioning.
Lower-quality stocks also extended their rally, with weaker-rated companies outperforming higher-quality peers. Small caps delivered their strongest relative performance versus large caps since July 2024, buoyed by rate cut expectations and stronger-than-anticipated earnings.
The Russell 2000 rose 7.14%, outpacing the Russell 1000’s 2.10% gain, while microcaps surged 9.25%. BofA noted that near-term outperformance for small caps may continue, aided by dovish remarks from Fed Chair Jerome Powell and signs of U.S. economic recovery.
“We see potential for continued Value leadership going forward, given the possibility of a cyclical recovery and a likely flip in our Regime Indicator to Recovery, coupled with higher quality, more inexpensive valuations,” said BofA analysts.
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