S&P500, large companies by capitalization are back on top
Last Update: 25/12/2024
The S&P 500 for the past few weeks has returned to being driven by the performance of the largest capitalization companies.
The S&P 500 Equal Weight Index is an index that includes the same 500 companies as the S&P 500, but with equal weights for each stock, rebalanced periodically. This index provides a more balanced representation of the U.S. stock market, which is particularly useful for observing the performance of smaller companies in the S&P 500 that have less weight in the traditional index.
The one depicted above is the trend in the strength ratio of the S&P 500 Equal Weight Index to the S&P 500 over the past 12 months. It shows how the indicator hit a low around last July, rising until September and then resuming its downward trend. What do these movements mean? In the periods when the indicator falls, it is the largest capitalization companies that lead the dances . Conversely, in stretches with a positive slope it is the companies with the thinnest capitalization that do best.
Currently, the large capitalization companies are back on top, effectively driving the performance of the S&P500. And thoughts naturally fly to the magnificent seven, which alone account for nearly 30 percent of the index’s capitalization.
