Thursday, September 29, 2016

Equal Weight/Market Cap Comparison

Here is a chart depicting the S&P 500 Equal Weight Index versus the S&P 500. Since roughly 2003 the equal weight index(SPXEW) was outperforming it's market cap cousin the S&P 500. SPXEW's gains were outpacing SPX to the tune of 30% in 2010-2011. As recently as 2014 the gain was still close to 10%. Strangely though in 2015 that lead started to dissipate rapidly.

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Here is a closer look from the last 3 years. We can start to see the market cap weighted index started to take the lead in 2015.  They are really neck and neck for the most part, with just a slight edge towards the S&P 500(SPX). The only thing I can think of is this has to do with market participants gravitating towards larger constituents the last couple years as uncertainty persists. That would put the equal weight index at a disadvantage as bigger names have less pull.

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