Equal-weighted ETFs see inflows as earnings broaden

Equal-weighted exchange-traded funds drew significant investor flows in July as corporate earnings widened beyond a small group of mega-cap companies. The Invesco S&P 500 Equal Weight ETF (RSP) received $1.5 billion in net new money in July, bringing its year-to-date inflows to more than $11 billion.

FactSet data show the S&P 500 is on track for about 24% year-over-year earnings growth in the second quarter. Revenue growth is expected across all 11 sectors, and ten sectors are on track for positive earnings growth. Mid-July market technicals showed roughly two-thirds of S&P 500 stocks trading above their 50-day moving averages, indicating broader price momentum across the index.

FactSet’s John Butters wrote that the seven largest tech and AI-related companies reported higher year-over-year earnings growth than the other 493 S&P 500 companies over recent quarters. The blended expected Q2 earnings growth rate for the other 493 is 22.8%, which would be the strongest pace for that group since late 2021. Four of the five top contributors to Q2 earnings growth are not members of the Magnificent Seven, and analysts forecast higher earnings growth for the other 493 companies in the second half of 2026.

Equal-weighted ETFs assign the same weight to each security in a benchmark rather than weighting by market capitalization, which reduces the impact of the largest names. Portfolio analytics data indicate the equal-weighted S&P 500 basket has outperformed some cap-weighted S&P 500 ETFs in recent periods as leadership broadened. RSP’s inflows have placed it among the most-owned ETFs year to date.

There are more than 150 equal-weighted ETFs covering roughly $100 billion in assets. Examples include the Goldman Sachs Equal Weight U.S. Large Cap Equity ETF (GSEW), which has posted double-digit gains year to date, and the ALPS Equal Sector Weight ETF (EQL), which allocates about 10% to each sector and reduces technology exposure compared with the S&P 500’s roughly 37% tech weight. Sector-focused products include the Invesco S&P 500 Equal Weight Technology ETF (RSPT), and the Invesco QQQ Equal Weight ETF (QEW) applies equal weighting to the Nasdaq 100. In QEW, technology represents about 47% of sector exposure versus nearly 69% in the cap-weighted Nasdaq 100; the top four holdings make up roughly 5% of QEW’s portfolio compared with roughly 25% in the cap-weighted Nasdaq 100, where Nvidia accounts for about 8%.

Fund flows and relative performance data this quarter show inflows to equal-weighted products and periods where equal-weighted baskets outperformed cap-weighted peers as earnings strength extended beyond the largest names.