S&P 500 vs S&P 500 Equalweight

Through most of 2007, the cap-weighted S&P 500 finally began to outperform the S&P 500 Equalweight index for the first time during the bull market. This meant that the biggest stocks in the index were doing much better than the smaller ones (falling line in top chart). In 2008, the trend has once again reversed, however, as smaller companies in the index have begun to outperform again (rising line in upper chart).

The bottom chart below compares the prices of the S&P 500 (cap weighted) and S&P 500 Equalweight index since the end of 1989. Through most of the 90s, the two traded pretty much inline with each other until the cap-weighted index began to do better in the late 90s. The bull market that began in October 2002, however, has been dominated by the equalweight index. For those interested, RSP is an ETF that tracks the S&P 500 Equalweight index.