Equal weight started the year on a high note, outperforming its cap-weight parent S&P 500 for another consecutive month.
The S&P 500 Equal Weight Index gained 7.4% in January, outperforming the S&P 500, which gained 6.3% during the month. After a turbulent 2022 and despite mixed earnings reports, the S&P 500 posted its best January performance in 2019.
The (RSP ) offers exposure to the S&P 500 EWI. 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.
Notably, the market entered a risk on period in January, as determined by commentary from S&P Dow Jones Indices, which states high beta’s outperformance over low volatility as a key indicator. In January, high beta beat low volatility by 16.1%, while in 2022, low volatility outpaced high beta by 15.7%.
Value’s performance relative to growth remained strong in January, noteworthy in a risk on environment.
Last year, the S&P 500 declined -18.1% in 2022 compared to RSP’s decline of -11.6%, each on a total return basis. While the S&P 500 EWI consistently outperformed last year, the gap between RSP and the S&P 500 widened substantially during the fourth quarter.
Eight out of 11 equal-weight sectors outperformed their cap-weighted counterparts in 2022. The sectors in which equal weight trailed the S&P 500 were energy, industrials, and healthcare. Energy was the top-performing sector in 2022 for both equal and cap-weighted.
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