The stocks that led the rally in 2023 are again traders’ top picks, defying broader outflows, according to Bank of America Corp. strategists.

Investors are reverting to owning growth, technology, the “AI bubble” and the so-called Magnificent Seven group of stocks including Apple Inc. as the 10-year Treasury yield settles in a range of 3.75% to 4.25%, a team led by Michael Hartnett wrote in a note.

This same group of equities led the Nasdaq 100 index’s 54% rally last year amid expectations of upcoming rate cuts, a solid economy and optimism about artificial intelligence developments. So far in January, Nvidia Corp., Microsoft Corp. and Meta Platforms Inc. — all part of the Magnificent Seven — are the biggest point gainers on the tech-heavy gauge, which hit a record Thursday.

While US stocks saw redemptions at $4.3 billion in the week through Jan. 17, technology stock funds saw the biggest two-week inflow since August at $4 billion, the strategists said, citing EPFR Global data.

Meanwhile, Hartnett said the new Treasury yield range implies investors will resume avoiding banks, REITs, small-caps and leverage. These trends will continue until the range breaks.

The strategist — who was negative on stocks last year even as they rallied — expects the market to continue being dependent on the path of Federal Reserve policy. Investor sentiment is “bullishly skating to where the puck is going,” and in this case, it’s toward a lower Fed funds rate.

Treasuries and the dollar were little changed Friday after frantic repricing earlier in the week of the outlook for Fed policy after doubts over the timing of potential interest rate cuts this year.

Looking globally, Hartnett said the Nikkei 225 benchmark stock index is a beneficiary of traders looking to pour money anywhere but China, especially as investors are still structurally underweight on Japanese stocks. The nation’s stock funds saw the largest inflow in 12 weeks in the week through Jan. 17, the BofA strategists said, citing EPFR Global data.

Elsewhere, European equity funds had outflows of $1 billion. Investors poured $14.1 billion into bond funds.

This article was provided by Bloomberg News.