Keeping the theme with our podcast from last week (take a listen here if you haven’t already), Tom talks about the S&P 500’s two different forms. Many people don’t know that the S&P 500 is a cap weighted index, meaning the stocks with the largest market capitalization receive the highest weighting. There’s also an equal weighted version of the same 500 stocks, aptly named the equal weighted S&P 500. As you might be able to guess, the equal weighted S&P 500 pays no attention to market capitalization.
Our friends at Dorsey Wright and Associates shared some very interesting data with us recently that we wanted to pass along to you. Tom covers that data in the video. We can utilize relative strength (read more about relative strength here) to see which version of the S&P 500 is in favor at any given time. This is one of many tools we use to manage the risk for our clients here at Mullooly Asset Management.
