S&P 500 equal-weight ETFs have returned to asset gathering territory as investors either profit-take on market cap-weighted gains or become increasingly wary of the indexs over-concentration in a handful of tech giants. <\/p>\n
According to data from ETFLogic, the $2.9bn Xtrackers S&P 500 Equal Weight UCITS ETF (XDEW) has seen $127m inflows over the past week, as at 9 June. <\/p>\n
This trend was even more pronounced in the US, with the $35bn Invesco S&P 500 Equal Weight ETF (RSP) adding a considerable $1.7bn in its strongest week of inflows since its inception. <\/p>\n
It follows a flight to more risk-on allocations so far in 2023 amid headline-grabbing developments in artificial intelligence (AI) technology and expectations the Federal Reserve could start to cut interest rates by the end of the year. <\/p>\n
While the latter may be supportive for debt-laden information technology and communications names, it could also signal the Fed deciding to halt its hawkish monetary policy programme as the US economy shows signs of weakness. <\/p>\n
With equal-weight ETFs having relatively outsized positions in old economy sectors such as energy, materials and industrials, the possibility of recession and a return to optimism in tech has seen XDEW book $647m outflows this year, until last week. <\/p>\n
However, onlookers are becoming increasingly sceptical of the surge enjoyed by the magnificent seven so far this year, with a combination of organic flows and index rebalances pushing unprecedented sums into tech names. <\/p>\n
Source: Bank of America <\/p>\n
Essentially all of the S&Ps year-to-date return comes from its top seven constituents Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia and Tesla, Ben Bakkum, lead investing researcher at JP Morgan, said. <\/p>\n
Those companies have together added over $3.6trn in market cap in 2023 while the other 493 companies in the index have together added almost $0. <\/p>\n
Source: JP Morgan <\/p>\n
At the time of writing, Apples $2.7trn market cap is equivalent to market cap of the bottom 200 companies in the S&P 500 and more than $100bn larger than the combined size of all Russell 2000 index constituents. <\/p>\n
Despite becoming more cautious about headiness in tech valuations, investors have also lost enthusiasm for 2022 safe havens. <\/p>\n
The $271m iShares S&P 500 Utilities Sector UCITS ETF (IUUS) shed more than half its assets following $336m outflows in the week to 9 June while the $1.1bn iShares S&P 500 UCITS ETF (IUES) also saw a $289m exodus. <\/p>\n
UCITS ETF investors also still favour vanilla US equity, with $334m flowing into the $37.7bn Vanguard S&P 500 UCITS ETF (VUSA). <\/p>\n
Meanwhile, weekly net short positions on the S&P 500 hit their highest level since 2007 at the start of June, according to the Commodity Futures Trading Commission (CFTC). <\/p>\n
Source: CFTC, Bespoke Investment Group <\/p>\n
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S&P 500 equal-weight ETFs in vogue as investors avoid big tech - ETF Stream<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" S&P 500 equal-weight ETFs have returned to asset gathering territory as investors either profit-take on market cap-weighted gains or become increasingly wary of the indexs over-concentration in a handful of tech giants. According to data from ETFLogic, the $2.9bn Xtrackers S&P 500 Equal Weight UCITS ETF (XDEW) has seen $127m inflows over the past week, as at 9 June. This trend was even more pronounced in the US, with the $35bn Invesco S&P 500 Equal Weight ETF (RSP) adding a considerable $1.7bn in its strongest week of inflows since its inception Continue reading