Week in Review - NYSE

Battle Royale S&P 500 | 11 August 2020

We’ve got front row seats to the battle royale between cap-weighted and equal-weighted ETFs—especially as Top 5 members Google, Apple, Amazon, and Facebook (all of the S&P 500) beat Street estimates last week. Price action continues to accelerate as investors seem to have concluded “the higher the better!”

While historical analysis shows that equal-weighted funds produce superior returns, this period seems to support the opposite. Cap-weighted funds have benefited from the rising performance of the information technology sector.

SPY, with over $292B in AUM, boasts a YTD return of +4.28%, driven by a 25% stake in the anomalous Top 5 performing stocks (while equal-weighted funds languish with a 1% stake). We see this as a “shock & awe” event and don’t expect a change in approach to valuations. We will take a closer look at the S&P 495 as companies report Q3 and Q4 earnings.

By comparing SPY head-to-head with similar funds, we uncover a slightly better recommendation: IVV reduces investment fees by 6 bps while lowering use of capital by 3.3%.

RSP, a traditional choice among equal-weighted S&P funds, delivered negative (4.28)% return for YTD 2020. Our analysis of over 132,000 possible replacements for RSP led us to IWP, which has increased returns by 3.9% and reduced risk by 2.7% with only a slight bump in fees. 

What We’re Reading

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Have a great week!


John DiBenedetto and the Portformer Team

John DiBenedetto

Sales | Business Development | Customer Success

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