Equal-weight failed. Now tech stocks look shaky again. So what should you do about S&P 500 risk? — SkimNews
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- Equal-weight S&P 500 has trailed the market-cap weighted version through 2026, with September its worst month — down more than 4% and capping its longest multi-week losing streak since 2022.
- DataTrek Research found the equal-weight index has lagged the cap-weighted S&P 500 over any given 1-year holding period for almost four years — the longest stretch in over 20 years.
- Market breadth has fallen to its lowest level since the dotcom bubble per Goldman Sachs, while a Kobeissi Letter basket of 42 AI stocks generated 67% of the S&P 500's price return since the start of 2024.
- Tech concentration now sits at nearly 40% of the cap-weighted S&P 500 versus about 16% of the equal-weight version, and Nvidia alone is larger than the index's entire consumer discretionary sector.
- Todd Rosenbluth of TMX VettaFi advises combining cap-weighted ETFs like Vanguard's VOO or State Street's SPYM with equal-weight funds such as Invesco's RSP or the ALPS Equal Weight Sector ETF (EQL) instead of choosing one approach.
- State Street's SPYM saw assets balloon by over $50 billion after becoming the default Trump Account investment, undercutting iShares' IVV with its ultra-low expense ratio.
- Todd Sohn of Baird Strategas recommends surrounding the S&P 500 core with SMID-cap exposure, natural resources and energy real assets, and high-quality short-duration investment grade fixed income as 'low Tech, low correlation' diversifiers.
Why it matters: Investors who bought equal-weight S&P 500 funds as a hedge against the index's 40% tech concentration have trailed for the longest stretch in 20+ years — and the 67% of S&P 500 returns driven by 42 AI names since 2024 means the risk they were hedging against hasn't gone away. The concrete alternative laid out by TMX VettaFi and Baird Strategas: pair core cap-weight holdings (VOO, SPYM) with equal-weight (RSP, EQL) or SMID-cap, real assets, and short-duration IG bonds rather than treating equal-weight as a standalone fix.
Ask SkimNews
