The S&P 500 Equal-Weight Index Is Telling a Very Different Story From the Headline Number

On a Tuesday morning, open any financial news app and scroll past the headlines to see the S&P 500 number presented with a level of authority that deters further inquiries. 0.4% higher, 1.2% lower. The market changed, the number changed, and that’s the narrative. But it’s not the entire tale. It hasn’t been the complete story for a number of years, and there has never been a greater discrepancy between the figure that people see and the reality that lies beneath it.

The 500 companies that make up the S&P 500 are not treated equally. Because it is a size-weighted index, the largest companies—Apple, Microsoft, Nvidia, Amazon, Meta, and a few others—have significantly more sway over the daily figure than the other 490 or so companies put together. The top ten stocks made up about 40.7% of the index’s total weight by the end of 2025. In the past, that percentage ranged from 20% to 25%. What the headline figure actually represents has altered due to the concentration doubling in just ten years. More than anything else, it now represents the decisions made on a daily basis by a select set of very major technological businesses.

The equal-weight form of the index is helpful in this situation. All 500 firms, regardless of size, receive the same 0.2% allocation from the S&P 500 Equal Weight Index, which is tracked by the Invesco ETF with the ticker RSP. A mid-sized industrial company and Apple have similar beginnings. Something genuine is being conveyed when the two index versions travel in distinct directions. In essence, the equal-weight version asks, “How is the average company doing?” Additionally, the response it provides has recently drastically changed from the number that flashes on the screen.

S&P 500 Equal-Weight Index — Key Facts

By the end of 2025, the divergence had almost reached an extreme threshold. The cap-weighted S&P 500 beat its equal-weight equivalent by almost 32% over the three years from 2023 to 2025, the largest difference since 1971. Almost all of the difference was caused by a few AI-related mega-caps that raised the headline figure while the majority of the market remained unchanged. It appeared to be a historic bull market to investors who owned the benchmark index. The experience was far more typical for those who held a more diverse mix of companies or made investments based on what “the market” was meant to reflect. It’s difficult to ignore how subtly that disparity grew over a three-year period with no public debate.

Then something changed in the beginning of 2026. The equal-weight index began to perform better. Early in March, the conventional cap-weighted SPY was down around 0.2% for the year, while RSP was up approximately 5.5%. After dominating returns for three years in a row, the Magnificent Seven started to wane. Capital began shifting toward previously neglected industries, such as materials, energy, and industrials, as well as businesses that produce tangible goods and create tangible profits but do not receive conference keynote invitations. These advances were instantly picked up by the equal-weight index, which maintains all 500 businesses at the same level. Because of its mega-cap anchoring, the headline number did not.

This historical pattern is worth considering. The cap-weighted S&P 500 rose on the strength of a small number of tech firms during the late 1990s dot-com bubble, while the whole market fell. The equal-weight index outperformed for seven years in a row after the bubble burst. Between 2000 and 2010, the cap-weighted index actually decreased by 9%, but the equal-weight counterpart recovered 65%. For 500 firms, the “lost decade” for the S&P 500 was not a lost decade. For a concentrated top tier, it was a lost decade, and the equal-weight index accurately reflected that fact. Though any straightforward comparison is complicated by the fact that the companies participating today are significantly more successful than the speculative names of the late 1990s, it’s plausible that the current moment rhymes with that one.

It is also worthwhile to comprehend the equal-weight approach’s structural logic independently. In actuality, the index works similarly to a systematic value approach because it rebalances on a regular basis, removing equities that have increased in value and adding to those that have decreased. At each rebalance, it automatically purchases what is inexpensive and sells what is costly. That method is counterproductive during times of little market momentum.

Just when momentum investors are piling in, a stock that is soaring fast is cut. However, that same discipline tends to accumulate over longer time periods. There is no obvious historical precedence for the approximately 28% valuation premium that the cap-weighted S&P 500 currently trades at over its equal-weight cousin. It’s still unclear if that premium corrects more quickly through what appears to be a rotation or more gradually through the mega-caps lowering their gains. One of the first locations where the answer appears is the equal-weight index, which silently runs its numbers in the background.