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S&P 500 Equal Weight Points to Strong Market Rally

From the desk of Omar Ezz, CFP®

It’s easy to dismiss the move off the March lows as being driven by Large Cap Tech or day trading on Robinhood. However, there is evidence that the bullish move in the market is more than just big tech and speculative day traders. The S&P 500 Equal Weight has actually outperformed the S&P 500 since March lows. The S&P 500 EW equally weights all its holdings, whereas the S&P 500 is market cap weighted (meaning greater weight is given to companies with higher market caps, leading to significant overweighs in firms like Apple, Amazon, Microsoft, etc.). The outperformance of the equal weighted index relative to its market capitalization weighted counterpart suggests there is strength (e.g. breadth) in this rally beyond tech and speculators.