The S &P 500 Equal Weight Index (IQX) assigns equal weight to each stock, regardless of its market capitalization. This method contrasts with the regular S &P 500, offering insights into whether a few high-market-cap stocks influence the broader index's performance.
Recently, the S &P 500 Equal Weight index declined, showing a -0.6% return YTD after falling 9% since July 31. This drop neutralized gains from two significant rallies this year (illustrated by the red line):
The rally from January to February 2 was negated by mid-March.
The rally from mid-March to July 31 has also been reversed.
In contrast, the market-capitalization-weighted S &P 500 index (SPX) is heavily influenced by eight major companies, which constitute 29% of the index. These companies have seen considerable growth up to July 31, propelled by tech and AI enthusiasm. Although their rally has slightly diminished, they continue to bolster the S &P 500. Since July 31, the S &P 500 index has declined by 7%, but remains 10.5% up YTD (depicted by the green line).
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