As if all the talk of tariffs hasn’t been enough, with Washington appearing to take aim at some of the largest US companies (Apple, Alphabet, Amazon.com, and Facebook), the market cap weighted S&P 500 is suggesting a much weaker equity market environment than you would get by looking at the performance of individual stocks today. We’ll have to see how things shake out into the close, but the equal-weighted S&P 500 (where each stock has a weighting of 0.2% compared) is outperforming the S&P 500 (where each stock’s weighting is based on market cap) by nearly a full percentage point. Performance disparities in favor of the equal-weighted index that are this wide are not very common. In fact, the last time we saw a wider one day performance disparity was ten years and two days ago on 6/1/09.
The chart below shows the daily performance spread between the two indices going all the way back 20 years. From 1999 through 2002, as the tech bubble was bursting, these types of occurrences were commonplace. Then again during the Financial Crisis, their frequency began to increase. But after the last occurrence in June 2009, there has only been one day where we have seen even close to a performance gap that was this wide, and that was a week after the election on 11/14/16. If these types of moves become more common, it will suggest a much weaker equity environment going forward. Start a two-week free trial to Bespoke Institutional to access all of our research and interactive tools.