RSPN: A Curious Case Of An Equal Weight ETF Outperforming Its Competitors

seekingalpha11-04

RSPN is an equal weight ETF focused on the small-cap industrial segment that has outperformed the market.It wasn’t the equal weight structure that drove its success, but rather its strong focus on mid...

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overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nRSPN: A Curious Case Of An Equal Weight ETF Outperforming Its Competitors\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-04 03:37 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4732600-rspn-curious-case-equal-weight-etf-outperforming-competitors><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>RSPN is an equal weight ETF focused on the small-cap industrial segment that has outperformed the market.It wasn’t the equal weight structure that drove its success, but rather its strong focus on mid...</p>\n\n<a href=\"https://seekingalpha.com/article/4732600-rspn-curious-case-equal-weight-etf-outperforming-competitors\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"RSPN","symbol_name":"Invesco S&P 500 Equal Weight Industrials ETF","start_time":0,"source_url":"https://seekingalpha.com/article/4732600-rspn-curious-case-equal-weight-etf-outperforming-competitors","article_id":"2480394645","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1340690117/image_1340690117.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2480394645","pubTimestamp":1730662643,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"As you may already know, when management implements an equal weight strategy on a thematic ETF, they aim to maintain a diversified set of holdings. This often results in the ETF becoming a hybrid between small-cap and large-cap stocks. In this case, RSPN is categorized as a mid-cap ETF. This leads to another question: How can a small-mid cap ETF outperform the large-cap segment when the Russell 2000 has underperformed the S&P 500?Examining RSPN's holdings, the equal weight structure in a thematic ETF with over 50 holdings naturally results in greater exposure to the small- and mid-cap market. So, RSPN outperformed its peers not because of its equally weighted strategy, but due to its tendency to include small- and mid-cap industrial stocks in its portfolio.    RSPN Stock Style  Fo","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":["rate"],"viewcount":null,"language":"en","relate_stocks":{"RSPN":"Invesco S&P 500 Equal Weight Industrials ETF"},"translate_title":"RSPN：等权重ETF跑赢竞争对手的奇怪案例","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"RSPN":0.9},"content_text":"RSPN is an equal weight ETF focused on the small-cap industrial segment that has outperformed the market.It wasn’t the equal weight structure that drove its success, but rather its strong focus on mid-cap industrials.The market continues to reward small- and mid-cap industrial companies, despite the Russell 2000 still underperforming the S&P 500.The reasons behind the widening performance spread of RSPN are political and geopolitical, and they could continue to persist.   Alistair Berg  When examining the industrial stock sector, the Invesco S&P 500® Equal Weight Industrials ETF (NYSEARCA:RSPN) stands out as one of the top performers. However, just by reading the ETF's title, a question arises: How can an equally weighted ETF, which selects stocks from the industrial segment of the S&P 500, outperform the market when the S&P 500 Equal Weight Index does not outperform the standard S&P 500? As you may already know, when management implements an equal weight strategy on a thematic ETF, they aim to maintain a diversified set of holdings. This often results in the ETF becoming a hybrid between small-cap and large-cap stocks. In this case, RSPN is categorized as a mid-cap ETF. This leads to another question: How can a small-mid cap ETF outperform the large-cap segment when the Russell 2000 has underperformed the S&P 500? Interestingly, over the past three to five years, the small-mid cap industrial segment has indeed outperformed the large-cap category, even though the small-cap market, well represented by the Russell 2000, has not outperformed the S&P 500. This trend is intriguing and can be attributed to significant political and geopolitical factors, which are worth exploring in greater detail. Comparison with Peers This is the peer comparison table proposed by Seeking Alpha, slightly modified by me, which in my opinion, provides a good representation of the industrial ETF landscape. Profile (Seeking Alpha) Excluding the best performer, First Trust RBA American Industrial Renaissance® ETF (AIRR), because, according to the fund profile on Seeking Alpha, 10% of AIRR’s holdings are financial stocks, which in my opinion makes it not a purely industrial ETF, the second-best performing ETF based on performance metrics is the Invesco S&P 500® Equal Weight Industrials ETF (RSPN). Total Return (Seeking Alpha) RSPN is an equal weight solution offered by Invesco that is quite intriguing, as it has managed to outperform other non-equally weighted ETFs. In a market environment characterized by a high concentration of capital in a few large companies, this is somewhat surprising. What's inside RSPN? Examining RSPN's holdings, the equal weight structure in a thematic ETF with over 50 holdings naturally results in greater exposure to the small- and mid-cap market. So, RSPN outperformed its peers not because of its equally weighted strategy, but due to its tendency to include small- and mid-cap industrial stocks in its portfolio.    RSPN Stock Style (Morningstar) For this reason, in my opinion, it should be compared with ETFs linked to the small- and mid-cap segment.  Small-mid cap comparison (Seeking Alpha) An interesting point to note is that the performance of RSPN is quite similar to that of the Invesco S&P SmallCap Industrials ETF (PSCI).  What, in my opinion, deserves further exploration is why small- and mid-cap industrials have been growing so rapidly during a period of economic turbulence like the past five years.  This is because, if we think about it, it’s equally fascinating that an ETF based on small-and mid-cap stocks has managed to outperform in this environment of high inflation and rising interest rates. Especially when you consider that the Russell 2000 hasn't been able to beat the S&P 500. Why Small-mid Cap Industrials This parallelism between RSPN and the iShares Russell 2000 ETF (IWM) over the past two years raises a fascinating point for discussion. The spread between these two ETFs has widened significantly over the last 3-5 years, reflecting strong interest from stock market investors in taking positions within the small- and mid-cap industrial segment. Data by YCharts So why is this happening? In my opinion, it’s largely due to political and geopolitical factors that are likely to continue, regardless of who the next U.S. president is. We are entering a “semi-new” era of \"reshoring\", which doesn’t always align with the concept of globalization. Starting with Trump, the plan to restore American manufacturing has been a priority, one that Biden also appears to support and is likely to be continued by the next administration (with Trump currently being the front-runner). We can easily see the effects of this shift in the increasing independence from China and the growing reliance on land-based supply chains, such as those from South America-economies that are also experiencing growth. Recent geopolitical tensions have created another divide in global trade, which has benefited U.S. industrial firms focused on domestic production, especially small- and mid-cap companies. This suggests that the relative overperformance of small- and mid-cap industrials, despite inflation and high interest rates, offers a significant indication of the future direction of the U.S. economy. Risk That said, while the U.S. dollar's surge in 2020 seemed to support that narrative, we're now dealing with a very different reality. There’s growing chatter about the dollar’s potential depreciation, along with rising discussions about the increasing independence and expansion of the BRICS bloc, and the trend of de-dollarization. DXY (TradingView) I believe that understanding who will win this “commercial” war requires closely following the dollar’s trend. Objectively, we are currently in a bearish phase for the dollar. However, if we take a broader perspective, it becomes clear that the recent contraction, driven by interest rate hikes, is not “irreversible”, and the dollar is still in an overall uptrend. And the strong interest from market investors in small- and mid-cap industrial stocks, which are well anchored to the U.S. economy, reflects this situation quite well. DXY, RSPN (TradingView) Conclusion  I have assigned a HOLD rating to RSPN because, in my opinion, it is a well-structured ETF. It is not heavily concentrated in large caps nor entirely in small caps, but rather has a strong focus on mid-caps, which are the core of the U.S. industrial economy. This equal weight strategy has outperformed the broader industrial market. From a broader perspective, RSPN is experiencing strong momentum, and the trend reflects a positive, bullish sentiment from market participants.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2480394645"}