S&P 500 Equal-Weight Index Set to Reach New Record High
The stock market continues to defy expectations as the S&P 500 equal-weight index is poised to achieve a new record high. This comes after a period of stagnation since January 2022, when the index last reached its peak. Unlike the traditional S&P 500, which is market-cap weighted and heavily influenced by a few large stocks, the equal-weight index assigns equal value to all 500 stocks in the index. This unique approach has resulted in outsized gains for the market-weighted index and a lower valuation for the equal-weighted index.
Experts on Wall Street have long believed that this divergence could lead to a more balanced and inclusive stock market rally, with a broader range of stocks contributing to overall gains. The recent market activity suggests that this narrative may finally be coming to fruition. Ross Mayfield, an investment strategy analyst at Baird, noted in a client memo on March 1st that the market is no longer dominated by a handful of stocks. This shift could be crucial for the 2024 stock market rally, especially as some of the previously dominant stocks, such as Apple and Tesla, experience setbacks.
Analysts and strategists are optimistic about the potential for strength in other sectors to support the market if the tech trade lags. Ben Snider, an equity analyst at Goldman Sachs, emphasized that the current strength in the economy and corporate America extends beyond the AI trade that has garnered significant attention. The fourth-quarter earnings reports showcased a wide base of earnings growth, indicating a more diverse and robust market.
John Stoltzfus, from Oppenheimer, echoed this sentiment in a recent note to clients. He highlighted the building broad-based strength as a reason to believe that the stock market rally is far from over. Stoltzfus sees room for further expansion and opportunities for equities to climb higher despite prevailing concerns and uncertainties.
The S&P 500 equal-weight index’s potential to reach a new record high signifies a shift in the market landscape. The dominance of a few “magnificent” stocks is giving way to a more inclusive and balanced rally. Investors and analysts are optimistic about the prospects of a broader market performance, with various sectors contributing to overall gains. As the economy continues to show strength and corporate America delivers solid earnings growth, the stock market rally appears to have a solid foundation. Despite the challenges and uncertainties that lie ahead, there is a growing belief that equities will continue to climb higher, defying the proverbial wall of worry.
