The average stock in the US S&P 500 Index has gained only 1.8% since the beginning of the year

This index, whose members are all considered with the same weighting of 0.2%, has lost a lot of ground, especially in the last two months (-3.2% in August, -5.1% in September), much more than the “normal” S&P 500 (-1.8% in August, -4.9% in September). This is mainly due to the fact that interest rate sensitive real estate and utility companies, which are more heavily weighted in the equal weighted index (11.7% vs. 4.9%), were significantly punished during this period.

At Tramondo, we analyse market indices, which may be somewhat overlooked by the general public, very closely in order to obtain a holistic picture of global financial markets.

The corresponding interpretation of this data serves as an important source of input for defining our tactical asset allocation, especially with regard to the risk character of our investment solutions. Strong divergences between the two indices indicate highly selective market dynamics that typically need to be addressed with an increased degree of caution.