Barclays: Can SPX/SPW returns keep up the pace?

In a note Tuesday, Barclays questioned whether the S&P 500 (SPX) and S&P 500 Equal-Weight (SPW) can sustain their current performance, citing a historical pattern of back-loaded returns.

“SPX/SPW returns are historically back-end loaded,” the analysts note, highlighting 2023’s “narrow, front-end heavy rally” as an exception. With the first half of 2024 mirroring 2023’s trend, Barclays expresses concern 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 aligns with the S&P 500 typically delivering stronger returns in the second half compared to the first.

Barclays attributes the atypical performance in 2023 to “extraordinary market concentration” driven by technology and AI hype. This led to a surge in early 2023, followed by a sluggish second half due to heavy exposure to technology and risk aversion in October.

Given the similar trends in the first half of 2024 and the expectation of convergence in earnings growth between Big Tech and the broader market, Barclays questions if the S&P 500 can outperform the S&P 500 Equal-Weight moving forward.