RSP - RSP: A Good ETF For Cutting Tech Exposure

2024-04-24 20:18:52 ET

Summary

• An increasing number of analysts are recommending investors switch from a market capitalization-weighted index like the SPX to an equal-weighted index ETF like the Invesco S&P 500 Equal Weight ETF.
• Besides providing a more balanced equity exposure across major industries, RSP has also outperformed the SPX by a meaningful margin since the fund's inception in 2003 (~24 years).
• Allocating to the RSP instead of the SPX addresses the problem of concentrating on the hottest themes.
• We also like that the RSP trades at a lower Trailing P/E multiple of 19x compared to the SPX at 28x.
• Accordingly, we initiate our coverage and bullish view on the RSP with a "Buy" rating.

Investors are increasingly coming to terms with the risk that mega-cap technology stocks may be priced for perfection, and that tech earnings may potentially struggle to live up to the lofty expectations. With the S&P 500 Index's ( SPX ) recent gains being narrowly driven by the "Magnificent Seven", even passive investors are exploring ways to reduce tech exposure without straying too far from their long-term strategic asset allocation to equities....

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