BofA Highlights Stability of Large-Cap Value Stocks
In August 2026, Bank of America Securities’ senior equity strategist Savita Subramanian reaffirmed the importance of large-cap value stocks in portfolios despite the current market focus on large growth names, particularly those linked to artificial intelligence. Since 2021, Subramanian has advised clients to maintain exposure to large-cap value equities until these stocks gain broader investor attention.
Defining Value Stocks and Their Market Performance
Value stocks are typically identified by trading below their intrinsic value, often reflected through lower price-to-earning ratios, signaling undervaluation. In contrast, growth stocks command premium valuations based on expected future cash flows. Subramanian notes that from 2023 through 2025, while growth stocks captured market enthusiasm, large-cap value stocks consistently ranked among the top two performers across various market-cap and style categories, underlining their defensive qualities during volatile periods.
Interest Rate and Demographic Trends Favor Value Stocks
Given the current macroeconomic landscape characterized by rising interest rates and inflation concerns, income-producing assets offering inflation protection have become scarce. Value stocks often provide stable dividends and recent earnings growth, which enhances their appeal. Historically, higher rates and inflation have tended to benefit value segments, as growth stocks reliant on long-term cash flows face increased macroeconomic headwinds.
Bank of America’s economic cycle indicators show the U.S. economy remains in the mid-expansion phase for the fourth consecutive month, further supporting value stocks’ relative advantage. While growth stocks have led during periods of profit deceleration, expanding corporate earnings overall may open opportunities for investors to seek cost-effective growth through value equities.
Institutional Underweighting of Value Stocks
Subramanian points out that active fund managers currently hold historically low allocations to the financial sector and remain cautious across other value sectors, suggesting institutional investors largely overlook value stocks. This setting provides openings for investors looking to increase exposure to undervalued segments.
Moreover, some technology companies previously classified as high-valuation growth stocks have shifted into the value category as their valuations normalize, expanding the scope beyond traditional ‘old economy’ firms.
Diversification Amid 'AI Fatigue'
Addressing growth investors, Subramanian highlights a phenomenon she terms 'AI fatigue,' where investors seek diversification through stocks with strong earnings growth forecasts and favorable analyst ratings. Bank of America has identified several value stocks within the S&P 500 expected to rank in the top 20% for five-year EPS growth, including healthcare companies Centene and Eli Lilly, as well as financial firms like Citizens Financial and KKR.
Market Snapshot
U.S. stock index futures rose, led by technology sector gains. Oil prices declined amid expectations for peace talks involving Iran. Bitcoin surpassed $80,000. Market attention centers on Nvidia’s Q2 earnings release and upcoming key U.S. inflation data. Multiple economic indicators are scheduled for release in the upcoming days.
In summary, Bank of America’s analysis emphasizes the resilience and under-recognition of value stocks in the current and anticipated economic environment, suggesting that both investors and portfolio managers may find opportunities in reassessing value-oriented asset allocation.