Food for toughts:
The equal-weight S&P just did something it hasn’t done since 2009: in October the equal-weight S&P 500 beat the cap-weighted version by 5.85 percentage points—the largest monthly outperformance since April 2009.
October’s other outliers:
- Consumer staples (XLP): The sector ETF rose roughly 10.9–11.3% (or about 11.6% in some sector measures), its best monthly performance since its December 1998 launch, and reached a record high. Individual names like Walmart posted their strongest months in decades (Walmart’s best since 1999, around +16–19%). This reflected a sharp defensive rotation.
- Semiconductors/chips: The Philadelphia Semiconductor Index (SOX) and ETFs like SOXX fell sharply—on the order of 15–16.5% for the month in various measures—amid AI spending concerns, valuations, and other pressures. There was an extended losing streak (up to 8 sessions in some counts, the longest in years). Intel was among the worst S&P 500 performers, down roughly 43–45%. Many chip names declined more than 20%.
- Staples vs. chips gap: The roughly 27-point spread between rising staples (~+11%) and falling chips (~−15–16%) ranked as one of the widest monthly gaps since 1998 (fourth-widest, behind a few extreme months in 2000–2001).
Supporting breadth signals reinforced the rotation: a large majority of S&P 500 stocks rose for the month even as the cap-weighted index was roughly flat to slightly down, and participation metrics (e.g., stocks above key moving averages) improved sharply from very weak early-month levels. This aligned with the equal-weight outperformance as money moved away from mega-cap tech/AI leaders toward the average stock and defensive sectors.
These moves marked a rapid shift in leadership after periods of concentration in the largest growth names. Historical precedents for large equal-weight outperformance months (such as April 1999, December 2000, November 2002, and April 2009) occurred in varied market environments and did not uniformly signal the broader market’s direction afterward.
