Despite lagging its cap-weighted parent S&P 500 in February, equal weight’s trailing 12-month relative outperformance is 5%.
Both equal weight and the S&P 500 slipped in February, declining 3.3% and 2.4%, respectively, but equal weight maintains its lead over a one-year period, supported by strong 2022 and January performance.
February erased some of January’s gains, but both indexes remain in the green year-to-date. In January, the S&P 500 EWI, tracked by the (RSP ), gained 7.4%, outperforming the S&P 500, which gained 6.3% during the month, its best January performance since 2019.
In 2022, the S&P 500 declined -18.1% in 2022 compared to RSP’s decline of -11.6%, each on a total return basis. While equal weight consistently outperformed last year, the gap between RSP and the S&P 500 widened substantially during the fourth quarter.
Key performance contributors for equal weight in February were the overweight to smaller-caps within the technology and consumer discretionary sectors, according to S&P Dow Jones Indices.
Six of the 11 equal-weight sectors outperformed their cap-weighted counterparts in February. The sectors that equal weight lagged include technology, financials, consumer discretionary, materials, and communication services.
Over a 12-month period, equal-weight technology, financials, consumer discretionary, and communication services have outperformed their cap-weighted sector counterparts.
RSP has historically demonstrated strong returns and introduces the small size and value factors to a portfolio, making it uniquely well positioned in the current environment.
The (RSPE ) offers the same methodology as RSP, but screens for ESG criteria. Equal-weighted strategies can provide diversification benefits and reduce concentration risk by weighting each constituent company equally so that a small group of companies does not have an outsized impact on the index.
In February, value underperformed growth, and value tilts, which had dominated January’s league table, were at or near the bottom in February, according to commentary from S&P Dow Jones Indices.
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