Equal weight began the yr on a excessive notice, outperforming its cap-weight dad or mum S&P 500 for an additional consecutive month.
The S&P 500 Equal Weight Index gained 7.4% in January, outperforming the S&P 500, which gained 6.3% throughout the month. After a turbulent 2022 and regardless of blended earnings experiences, the S&P 500 posted its greatest January efficiency in 2019.
The Invesco S&P 500® Equal Weight ETF (RSP) presents publicity to the S&P 500 EWI. RSP has traditionally demonstrated sturdy returns and introduces the small dimension and worth components to a portfolio, making it uniquely nicely positioned within the present setting.
The Invesco ESG S&P 500 Equal Weight ETF (RSPE) presents the identical methodology as RSP, however screens for ESG standards. Equal-weighted methods can present diversification advantages and cut back focus danger by weighting every constituent firm equally so {that a} small group of corporations doesn’t have an outsized affect on the index.
Notably, the market entered a danger on interval in January, as decided by commentary from S&P Dow Jones Indices, which states excessive beta’s outperformance over low volatility as a key indicator. In January, excessive beta beat low volatility by 16.1%, whereas in 2022, low volatility outpaced excessive beta by 15.7%.
Worth’s efficiency relative to development remained sturdy in January, noteworthy in a danger on setting.
Final yr, the S&P 500 declined -18.1% in 2022 in comparison with RSP’s decline of -11.6%, every on a complete return foundation. Whereas the S&P 500 EWI constantly outperformed final yr, the hole between RSP and the S&P 500 widened considerably throughout the fourth quarter.
Eight out of 11 equal-weight sectors outperformed their cap-weighted counterparts in 2022. The sectors by which equal weight trailed the S&P 500 had been vitality, industrials, and healthcare. Power was the top-performing sector in 2022 for each equal and cap-weighted.
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The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.