It’s time to buy into the equal-weighted S & P 500 index. The S & P 500 Equal Weight Index might be the next big play ahead of 2025, as investors expect more sectors of the market, such as financials, will participate in the rally as opposed to the mega-cap leadership that dominated this year’s market. “If you get this continued rotation and mega-cap continues to lag in that rally, naturally, that’s going to take some of the wind out of the sail for the S & P, given how heavily weighted those leaders have been in the index,” Jason Hunter, head of technical strategy at JPMorgan, said Monday on CNBC’s ” Closing Bell .” “So it’s more, like I said, more of a Russell and S & P Equal Weight.” RSP YTD mountain Invesco S & P 500 Equal Weight ETF Much of this year’s advance has to do with the so-called Magnificent Seven stocks, which bolstered the market-cap weighted S & P 500 with their enormous size and influence. Together, these mega-cap tech companies — which include Nvidia and Apple — account for roughly one-third of the benchmark. But many investors expect the rally may have run out of steam — at least for the broad market index, given that it’s in its third year of a bull run. The S & P 500 is higher by more than 26% in 2024, and it surged about 24% in 2023 — a historically strong pace of gains many strategists are not expecting will repeat in 2025. Bank of America’s equity and quant strategist Savita Subramanian last month said she prefers the equal-weighted index, given that market-cap weighted S & P 500 is “statistically expensive” by just about every metric. Other parts of the market have started to outperform. Financials is the third-best performing sector, having rallied about 34% year to date. The Invesco S & P 500 Equal Weight ETF (RSP) is one way for investors to play the trend, and the fund has captured nearly $4.4 billion in inflows in the past month, according to FactSet. It’s up about 18% in 2024 and carries an expense ratio of 0.2%.
More investors are turning to the equal-weighted S&P 500 ahead of 2025