If results of the past 10 years are any indication, the strategy of equal weighting the S&P 500 can declare a significant victory over its capitalization-weighted counterpart.
“Even with the Standard & Poor’s 500 Index down 19% since the bursting of the technology bubble in 2000, it’s been no lost decade for stocks,” a Bloomberg story over the weekend notes. “Gains in the S&P 500 Equal Weighted Index show the resilience of U.S. companies that are forecast to report record earnings this year even as Europe’s debt crisis threatens growth again.”
“The benchmark gauge for American common equity climbed 66% from March 24, 2000, through Dec. 2, after stripping out adjustments for market value,” the story says.
But that’s of little help to most investors, whose returns reflect the capitalization-weighted index.
“Corporate America repaired itself,” Chris Hyzy, chief investment officer at U.S. Trust Co., told Bloomberg. “On an equal-weighted basis, it hasn’t been a lost decade.”