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In a note on Tuesday, Barclays questioned whether the S&P 500 (SPX) and S&P 500 Equal-Weight (SPW) could maintain their current performance, pointing to a historical pattern of compounding returns.
“SPX/SPW returns have historically been back-loaded,” the analysts note, highlighting the “narrow, front-heavy rally” in 2023 as an exception. With the first half of 2024 trend mirroring that of 2023, Barclays is concerned about the ability to maintain this pace.
Historically, the S&P 500 tends to underperform its equal-weighted counterpart in the first half, followed by a period of outperformance in the second half. This is consistent with the S&P 500 having stronger returns in the second half than in the first half.
Barclays attributes the unusual performance in 2023 to “unusual market focus” driven by technology and AI hype. This led to a rally in early 2023, followed by a slow second half due to heavy exposure to technology and risk aversion in October.
Given similar trends in the first half of 2024 and expectations of convergence in earnings growth between Big Tech and the broader market, Barclays wonders whether the S&P 500 could outperform the S&P 500 Equal-Weight in the future.
