Left behind by the 2023 stock-market rally? Use this type of ETF to play catch-up, says BofA.

Shares of chip company Nvidia have skyrocketed around 188% this year through Thursday, while Meta soared almost 143% over the same period and Tesla has surged about 125%, FactSet data show.

The S&P 500’s most heavily weighted stock, Apple, has jumped almost 48% so far this year through Thursday, for a market value of around $3 trillion.

During the first six months of 2023, the S&P 500 rose 15.9% for its strongest first half of any year since 2019, according to Dow Jones Market Data. That’s after tumbling last year to the greatest degree since the financial crisis of 2008, as the Federal Reserve’s interest-rate hikes in 2022 broadly pummeled stocks and bonds as the central bank sought to cool the economy in an effort to bring down inflation.

Meanwhile, the Invesco S&P 500 Equal Weight ETF RSP, +0.90%, which tracks an equal-weighted index of S&P 500 companies, has seen inflows of around $4.5 billion over the past month, according to FactSet data as of July 5. Shares of the ETF rose 5.9% during the first half of the year.

On Thursday, the U.S. stock market traded lower as Treasury yields jumped after a report from payroll-services company ADP showed the private sector added far more jobs in June than economists expected. The S&P 500 SPX, 0.24% fell 0.8%, while the Dow Jones Industrial Average DJIA, 0.62% shed 1.1% and the Nasdaq Composite COMP, 0.18% dropped 0.8%.

“ADP reported strong gains in June although the ADP metric is not always a reliable indicator for month-to-month changes within the official labor report,” cautioned Jeffrey Roach, chief economist for LPL Financial, in emailed commentary Thursday. The U.S. government is slated to release its employment report for June on Friday at 8:30 a.m. Eastern time.

“Unless Friday’s report is much weaker than expected, the Fed will not likely change its plans to increase rates during the next regularly scheduled meeting later this month,” said Roach.

Meanwhile, the group of seven megastocks in the S&P 500 could still push the index higher from here, although they appear richly valued, according to the DataTrek note.

“Cost cutting, a resilient US economy, and enthusiasm about generative artificial intelligence have largely driven Big Tech’s rally this year,” Rabe wrote.

“Big Tech is showing better upside earnings revisions and expected 2024 earnings growth than the broader U.S. equity market,” she said. “These names have rich valuations, so their reported results and guidance during the upcoming earnings season will prove important in showing just how much gen AI can be to their top and bottom lines in the coming quarters.”