In recent years, Wall Street's returns seem to have overly relied on a few tech giants, and concerns about &#34;tech dominance&#34; are growing, shifting focus towards equal-weight ETFs like the S&amp;P 500.
According to Morningstar data, in the second half of 2024, Invesco's S&amp;P 500 Equal Weight ETF attracted approximately $14.4 billion, bringing the fund's total inflow for the year to $17 billion, far exceeding its record inflow of about $12.8 billion set in 2023, despite the fund underperforming the S&amp;P for several consecutive years.
Data from S&amp;P Dow Jones Indices shows that in 2024, the S&amp;P 500 index rose by 24%, with the &#34;seven giants&#34; contributing about half of the gains, while the equal-weight index only increased by 11%, with its quarterly adjustments favoring low-growth stocks.
This shift also highlights investors' concerns about these seven giants. Manish Kabra, head of U.S. equity strategy at Société Générale, stated:
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“Investors are currently most concerned about concentrated risk, fearing that the market is too top-heavy. It is expected that this year, aside from the largest tech companies, other companies will achieve double-digit earnings growth.”
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Notably, Invesco funds sell leading stocks in the S&amp;P index and buy underperforming stocks during each quarterly rebalancing to ensure each stock has an equal share of the fund's assets. Although the fund had underperformed for several years, it has now accumulated over $72 billion in assets and has become one of the largest 25 ETFs in the U.S.
Additionally, investor interest in derivatives is also heating up. Since the launch of the S&amp;P 500 Equal Weight futures contracts on the Chicago Mercantile Exchange (CME) in February, the average number of open contracts this month reached 16,500, valued at approximately $2.4 billion.
Paul Woolman, head of global equity products at CME, stated that the significant drop in tech giants' stock prices in July and August last year prompted more clients to focus on how to manage this risk. Alessio de Longi, head of Invesco Solutions, also noted that the increased interest in equal-weight ETFs reflects market participants' desire to diversify investments into cheaper assets rather than just chasing performance. T. Rowe Price portfolio manager Rick de los Reyes expects:
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“A shift in market sentiment could benefit lagging sectors such as energy, metals, mining, and other industrial stocks.”
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However, Bryan Armour, head of passive strategy research at Morningstar, cautioned that using adjusted funds to give all companies equal weight is not the best way to avoid market concentration risk, suggesting that fundamental factors should be incorporated into the assessment of company weights to better reflect market characteristics

In the second half of last year, Invesco S&P 500 Equal Weight ETF attracted approximately $14.4 billion, bringing its total inflow for the year to $17 billion, far exceeding its record inflow set in 2023. Analysts believe that investors are currently most concerned about concentrated risk, fearing that the market is too top-heavy. It is expected that this year, apart from the largest technology companies, other companies will achieve double-digit growth in earnings

- Recent years have seen Wall Street returns heavily reliant on a few tech giants, raising concerns about market concentration and shifting investor focus to equal-weight ETFs like the Invesco S&P 500.  
- In the second half of 2024, the Invesco ETF attracted approximately $14.4 billion, totaling $17 billion for the year, despite underperforming the S&P 500 in previous years.  
- Investors are increasingly interested in managing concentration risk, with expectations of double-digit earnings growth outside the largest tech firms, while experts caution that equal-weight strategies may not effectively mitigate market concentration risks.

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Concerns about "technology dominance" intensify, and equal-weight ETFs like S&P are booming