(Reuters) – BofA Global Research said on Wednesday it expects the S&P 500 to end 2023 nearly 7% higher than it previously forecast, and that “old economy” stocks on the blue-chip index could benefit as much, if not more, over their new-age tech peers.

The Wall Street brokerage now expects the index to end the year at 4,600 points, higher than its previous estimate of 4,300 and 3.5% higher than its close of 4,443.95 on Tuesday.

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 (NASDAQ:NVDA) and Meta (NASDAQ:META) 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.

This has not been priced “as richly,” Subramanian says.

Moreover, not only have equal-weighted stocks “almost always” beat mega-cap stocks in the past nine recovery cycles, but they could help mitigate duration risks when up against safer assets such as bonds, Subramanian noted.

While the S&P 500 is roughly in line with its historical average on an equal-weighted basis, the valuation gap between the top seven stocks and equal-weighted (SPW) stocks is the highest since the 2001 Tech bubble, Subramanian notes.

This suggests “more upside in SPW.”

However, even mega-caps have a chance if they keep valuations attractive, like Meta did when it cut costs and announced a buyback early this year, Subramanian said.

“Tech companies shifting focus to shareholder return, efficiency and right-sizing cost structure could be their path to outperformance from here.”

Several brokerages including Morgan Stanley have recently made the case for cyclical sectors, especially energy, as a good way to trade stocks through the year-end.