Equal-weighted strategies are mostly outperforming those that use traditional market-cap weightings
Equal-weighted sector ETFs have been outperforming market-cap-weighted counterparts this year, especially in technology.
This has mostly been a year of broadening performance for the U.S. stock market, and has also marked the reversal of two trends: The largest technology players aren't driving the S&P 500 index's performance, like they did in 2025, and a measure used by investors to value the index has been declining.
What this means to investors is that equal-weighted indexes and sectors have been outperforming traditional indexes and sectors that are weighted by companies' market capitalization. And it is easy to play along with this trend through exchange-traded funds.
The S&P 500 SPX is market-cap weighted, meaning that the largest three companies in the index - Nvidia (NVDA), Apple (AAPL) and Microsoft (MSFT) - make up nearly 21% of the portfolio of the $814 billion State Street SPDR S&P 500 ETF Trust SPY, which tracks the index by holding all of its stocks. The largest 10 companies make up 39% of the ETF.
Through Friday, the S&P 500 Equal Weight Index XX:SP500EW had returned 16.1%, ahead of the 13.5% return for the cap-weighted S&P 500, both with dividends reinvested, according to FactSet. The last time the equal-weight index came out ahead for a full year was in 2022, when it declined 11.5% while the cap-weighted S&P 500 fell 18.1%.
The dispersion of the stock market's performance in 2026 has coincided with a decline in forward price-to-earnings ratios. Rolling 12-month profit estimates have been rising more quickly than share prices, so the S&P 500's forward P/E ratio has declined to 19.7, from 22.2 at the end of 2025, while the S&P 500 Equal Weight Index's forward P/E has declined to 16.4, from 16.8.
Rene Reyna, Invesco's head of ETF strategy, told MarketWatch that as long as the theme of declining P/E ratios holds, "equal-weight can continue to outperform market-cap-weighted versions" of the S&P 500 and its sectors.
He also said interest in the equal-weight theme was strong among investors, with net inflows of $12.6 billion into the Invesco S&P 500 Equal Weight ETF RSP, which has grown to $101 billion in assets under management.
The theme of outperformance for equal weighting within the S&P 500 has been most extreme for the information-technology sector XX:SP500.45. To illustrate this, we will first show year-to-date performance and forward P/E valuations for Invesco's equal-weighted S&P 500 sector and index ETFs, and then the State Street SPDR cap-weighted ETFs. After that, we'll combine the two lists for an easier comparison.
First, here are the 12 Invesco equal-weight ETFs sorted by how well the sectors have performed this year, with the full index ETF at the bottom:
Exchange-traded fund Invesco equal-weight ETF 2026 return through Aug. 28 Forward P/E Forward P/E as of Dec. 31
Invesco S&P 500 Equal Weight Energy ETF 43.3% 13.4 14.6
Invesco S&P 500 Equal Weight Technology ETF 42.5% 20.5 20.9
Invesco S&P 500 Equal Weight Materials ETF 20.8% 16.3 18.2
Invesco S&P 500 Equal Weight Health Care ETF 18.0% 18.6 17.9
Invesco S&P 500 Equal Weight Industrials ETF 10.4% 21.0 22.2
Invesco S&P 500 Equal Weight Real Estate ETF 9.7% 35.1 34.7
Invesco S&P 500 Equal Weight Consumer Staples ETF 9.7% 16.4 15.3
Invesco S&P 500 Equal Weight Financials ETF 9.5% 13.8 13.9
Invesco S&P 500 Equal Weight Utilities ETF 3.0% 15.6 16.3
Invesco S&P 500 Equal Weight Consumer Discretionary ETF 0.1% 17.9 18.1
Invesco S&P 500 Equal Weight Communication Services ETF -5.1% 14.9 16.6
Invesco S&P 500 Equal Weight ETF 16.1% 17.4 18.1
Sources: LSEG (returns) and Bloomberg via Invesco (P/E)
And here are the 12 cap-weighted State Street SPDR cap-weighted ETFs:
Exchange-traded fund SPDR cap-weighted ETF 2026 return through Aug. 28 Forward P/E Forward P/E as of Dec. 31
State Street Energy Select Sector SPDR ETF 42.1% 13.3 16.2
State Street Technology Select Sector SPDR ETF 29.3% 23.8 26.4
State Street Materials Select Sector SPDR ETF 18.2% 17.4 19.5
State Street Health Care Select Sector SPDR ETF 11.5% 19.0 19.1
State Street Industrial Select Sector SPDR ETF 14.8% 24.6 25.1
State Street Real Estate Select Sector SPDR ETF 11.9% 36.0 34.9
State Street Consumer Staples Select Sector SPDR ETF 11.4% 19.8 18.8
State Street Financial Select Sector SPDR ETF 7.0% 16.2 16.9
State Street Utilities Select Sector SPDR ETF 1.4% 16.9 17.9
State Street Consumer Discretionary Select Sector SPDR ETF -1.5% 23.5 26.6
State Street Communications Services Select Sector SPDR ETF -3.5% 15.2 18.4
State Street SPDR S&P 500 ETF Trust 13.4% 20.3 22.8
Sources: LSEG (returns) and Bloomberg via Invesco (P/E)
And now, leaving the sectors in the same order, let's combine the two tables for a comparison of this year's performance and current P/E:
Sector or index Invesco equal-weight ETF 2026 return SPDR cap-weighted ETF 2026 return Equal-weight forward P/E Cap-weighted forward P/E
Energy 43.3% 42.1% 13.4 13.3
Technology 42.5% 29.3% 20.5 23.8
Materials 20.8% 18.2% 16.3 17.4
Healthcare 18.0% 11.5% 18.6 19.0
Industrial 10.4% 14.8% 21.0 24.6
Real Estate 9.7% 11.9% 35.1 36.0
Consumer Staples 9.7% 11.4% 16.4 19.8
Financials 9.5% 7.0% 13.8 16.2
Utilities 3.0% 1.4% 15.6 16.9
Consumer Discretionary 0.1% -1.5% 17.9 23.5
Communications -5.1% -3.5% 14.9 15.2
S&P 500 16.1% 13.4% 17.4 20.3
Sources: LSEG (returns) and Bloomberg via Invesco (P/E)
MW Here's how to invest using a winning strategy that offers a spin on traditional stock index funds
By Philip van Doorn
Equal-weighted strategies are mostly outperforming those that use traditional market-cap weightings
Equal-weighted sector ETFs have been outperforming market-cap-weighted counterparts this year, especially in technology.
This has mostly been a year of broadening performance for the U.S. stock market, and has also marked the reversal of two trends: The largest technology players aren't driving the S&P 500 index's performance, like they did in 2025, and a measure used by investors to value the index has been declining.
What this means to investors is that equal-weighted indexes and sectors have been outperforming traditional indexes and sectors that are weighted by companies' market capitalization. And it is easy to play along with this trend through exchange-traded funds.
The S&P 500 SPX is market-cap weighted, meaning that the largest three companies in the index - Nvidia (NVDA), Apple (AAPL) and Microsoft (MSFT) - make up nearly 21% of the portfolio of the $814 billion State Street SPDR S&P 500 ETF Trust SPY, which tracks the index by holding all of its stocks. The largest 10 companies make up 39% of the ETF.
Through Friday, the S&P 500 Equal Weight Index XX:SP500EW had returned 16.1%, ahead of the 13.5% return for the cap-weighted S&P 500, both with dividends reinvested, according to FactSet. The last time the equal-weight index came out ahead for a full year was in 2022, when it declined 11.5% while the cap-weighted S&P 500 fell 18.1%.
The dispersion of the stock market's performance in 2026 has coincided with a decline in forward price-to-earnings ratios. Rolling 12-month profit estimates have been rising more quickly than share prices, so the S&P 500's forward P/E ratio has declined to 19.7, from 22.2 at the end of 2025, while the S&P 500 Equal Weight Index's forward P/E has declined to 16.4, from 16.8.
Rene Reyna, Invesco's head of ETF strategy, told MarketWatch that as long as the theme of declining P/E ratios holds, "equal-weight can continue to outperform market-cap-weighted versions" of the S&P 500 and its sectors.
He also said interest in the equal-weight theme was strong among investors, with net inflows of $12.6 billion into the Invesco S&P 500 Equal Weight ETF RSP, which has grown to $101 billion in assets under management.
The theme of outperformance for equal weighting within the S&P 500 has been most extreme for the information-technology sector XX:SP500.45. To illustrate this, we will first show year-to-date performance and forward P/E valuations for Invesco's equal-weighted S&P 500 sector and index ETFs, and then the State Street SPDR cap-weighted ETFs. After that, we'll combine the two lists for an easier comparison.
First, here are the 12 Invesco equal-weight ETFs sorted by how well the sectors have performed this year, with the full index ETF at the bottom:
Exchange-traded fund Invesco equal-weight ETF 2026 return through Aug. 28 Forward P/E Forward P/E as of Dec. 31
Invesco S&P 500 Equal Weight Energy ETF 43.3% 13.4 14.6
Invesco S&P 500 Equal Weight Technology ETF 42.5% 20.5 20.9
Invesco S&P 500 Equal Weight Materials ETF 20.8% 16.3 18.2
Invesco S&P 500 Equal Weight Health Care ETF 18.0% 18.6 17.9
Invesco S&P 500 Equal Weight Industrials ETF 10.4% 21.0 22.2
Invesco S&P 500 Equal Weight Real Estate ETF 9.7% 35.1 34.7
Invesco S&P 500 Equal Weight Consumer Staples ETF 9.7% 16.4 15.3
Invesco S&P 500 Equal Weight Financials ETF 9.5% 13.8 13.9
Invesco S&P 500 Equal Weight Utilities ETF 3.0% 15.6 16.3
Invesco S&P 500 Equal Weight Consumer Discretionary ETF 0.1% 17.9 18.1
Invesco S&P 500 Equal Weight Communication Services ETF -5.1% 14.9 16.6
Invesco S&P 500 Equal Weight ETF 16.1% 17.4 18.1
Sources: LSEG (returns) and Bloomberg via Invesco (P/E)
And here are the 12 cap-weighted State Street SPDR cap-weighted ETFs:
Exchange-traded fund SPDR cap-weighted ETF 2026 return through Aug. 28 Forward P/E Forward P/E as of Dec. 31
State Street Energy Select Sector SPDR ETF 42.1% 13.3 16.2
State Street Technology Select Sector SPDR ETF 29.3% 23.8 26.4
State Street Materials Select Sector SPDR ETF 18.2% 17.4 19.5
State Street Health Care Select Sector SPDR ETF 11.5% 19.0 19.1
State Street Industrial Select Sector SPDR ETF 14.8% 24.6 25.1
State Street Real Estate Select Sector SPDR ETF 11.9% 36.0 34.9
State Street Consumer Staples Select Sector SPDR ETF 11.4% 19.8 18.8
State Street Financial Select Sector SPDR ETF 7.0% 16.2 16.9
State Street Utilities Select Sector SPDR ETF 1.4% 16.9 17.9
State Street Consumer Discretionary Select Sector SPDR ETF -1.5% 23.5 26.6
State Street Communications Services Select Sector SPDR ETF -3.5% 15.2 18.4
State Street SPDR S&P 500 ETF Trust 13.4% 20.3 22.8
Sources: LSEG (returns) and Bloomberg via Invesco (P/E)
And now, leaving the sectors in the same order, let's combine the two tables for a comparison of this year's performance and current P/E:
Sector or index Invesco equal-weight ETF 2026 return SPDR cap-weighted ETF 2026 return Equal-weight forward P/E Cap-weighted forward P/E
Energy 43.3% 42.1% 13.4 13.3
Technology 42.5% 29.3% 20.5 23.8
Materials 20.8% 18.2% 16.3 17.4
Healthcare 18.0% 11.5% 18.6 19.0
Industrial 10.4% 14.8% 21.0 24.6
Real Estate 9.7% 11.9% 35.1 36.0
Consumer Staples 9.7% 11.4% 16.4 19.8
Financials 9.5% 7.0% 13.8 16.2
Utilities 3.0% 1.4% 15.6 16.9
Consumer Discretionary 0.1% -1.5% 17.9 23.5
Communications -5.1% -3.5% 14.9 15.2
S&P 500 16.1% 13.4% 17.4 20.3
Sources: LSEG (returns) and Bloomberg via Invesco (P/E)