Stocks fell sharply on Friday, closing out a tough week for markets.
The S&P 500 shed nearly 5% this week while the Invesco S&P 500® Equal Weight ETF (RSP), which tracks the S&P 500 Equal Weight Index, dropped over 6% during the same period. This week’s retreat clawed back January’s strong gains, dragging RSP modestly in the red year to date.
This week ended with the Shutdown of Silicon Valley Bank, the 16th largest bank in the U.S., which sparked a rush into the Treasury market. The yield on the two-year note notched its greatest two-day decline since 2001. Meanwhile, the Labor Department reported Friday that employers added 311,000 jobs in February, continuing the labor market’s unexpected expansion.
For investors with money on the table, now is an ideal time to allocate to RSP while prices are off recent highs.
RSP has historically demonstrated solid returns and introduced the small size and value factors to a portfolio, which led to its dramatic outperformance in 2022. In 2022, the S&P 500 declined -18.1% in 2022 compared to RSP’s decline of -11.6%, each on a total return basis. While equal weight consistently outperformed last year, the gap between RSP and the S&P 500 widened substantially during the fourth quarter.
“For advisors that want quality large cap exposure but without a high degree of individual security risk, an equal weight approach makes more sense than a market cap weighted. This week was a reminder that picking winners is not easy,” Todd Rosenbluth, head of research at VettaFi, said.
The Invesco ESG S&P 500 Equal Weight ETF (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.
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