Fade SMID and megacaps, look to equal-weighted S&P 500: BofA
In a note published Wednesday, the Wall Street bank highlighted SPW as a compelling alternative, trading on favorable valuation and improved fundamentals relative to both the mega-caps and the
Excluding these, the S&P 493 is now on track to grow earnings by 8% year-over-year in the second quarter, marking its first quarter of earnings growth since Q4 2022. Notably, the equal-weighted S&P 500 is currently trading at an “extreme discount” to the cap-weighted S&P 500, nearing levels last seen during the Tech Bubble, strategists highlight.
The SPW offers a lower beta compared to the cap-weighted S&P 500 and the Russell 2000, which have betas of 1 and 1.1, respectively. Betas measure the volatility or systematic risk of a stock or index relative to the overall market. For instance, a beta less than 1 suggests the asset is less volatile than the market.
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