Indicator: Equal-Weight vs Cap-Weight (RSP / SPY)

Current value

0.2925

Updated 2026-03-18

Range

Min 0.2743

Max 0.3748

Mean 0.3302

Percentiles

1Y 50%

5Y 9%

10Y 4%

Correlation

1Y 0.8912

5Y 0.9162

Full 0.9577

RSP vs SPY daily returns

Chart

Log

Relative move

-1.4%

3.0%

4.2%

ytd

-5.7%

vs SPY — negative = RSP lagged

Market Regimes

Regime	Macro axis	Change	Min	Max	Mean	Corr
China-WTO / housing-credit / commodity boom 2002-10 → 2007-10	growth/credit expansion	+18.6%	0.28	0.34	0.32	0.9428
GFC / deleveraging / dollar shortage 2007-10 → 2009-03	credit stress/liquidity squeeze	-8.2%	0.29	0.34	0.32	0.9714
Policy-led rebound / euro-sovereign-crisis overlay 2009-03 → 2012-07	easing/backstop	+17.7%	0.3	0.38	0.36	0.9824
Secular stagnation / QE / low inflation / duration bull 2012-07 → 2020-02	disinflation/low rates	-2.5%	0.35	0.39	0.38	0.9736
Pandemic shock / liquidity crash 2020-02 → 2020-03	liquidity shock	-8.7%	0.32	0.35	0.34	0.9940
Policy bazooka / monetary euphoria 2020-03 → 2020-11	liquidity impulse	-0.2%	0.32	0.35	0.33	0.9205
Reopening reflation / fiscal boom / supply bottlenecks 2020-11 → 2021-11	growth reopening	+1.3%	0.33	0.36	0.35	0.8771
Inflation shock / duration crash / aggressive tightening 2021-11 → 2022-11	inflation shock	+8.9%	0.34	0.37	0.35	0.9718
Disinflation rebound / AI-led narrow bull / higher-for-longer 2022-11 → 2024-09	disinflation + narrow equity leadership	-14.5%	0.29	0.37	0.33	0.8788
Disinflationary easing / resilient growth / AI capex under oil-shock test 2024-09 → now	disinflation under stress	-6.8%	0.27	0.31	0.3	0.8788

What is this indicator?

The RSP/SPY ratio is a “lie detector” for the stock market. It tells you if the actual economy is doing well, or if just five tech bros in California are having a good year.

General Idea

This indicator compares two ways of owning the S&P 500:

Cap-Weight (SPY): The standard index. The bigger the company, the larger the slice of the pie. Apple and Microsoft alone might make up 13-14% of the fund. It is a “winner-take-all” strategy.
Equal-Weight (RSP): Every company gets the same slice (~0.2%). Apple gets the same influence as a random plumbing supply company in the bottom 500. It is a “participation trophy” strategy.

When you divide the price of RSP by SPY, you get a line chart that shows the battle between the “Average Stock” and the “Mega-Caps.”

What Does It Tell?

Ratio Rising (RSP > SPY): The “generals” (Mega-caps) and the “soldiers” (average stocks) are advancing together, or the soldiers are leading. This is a healthy, broad rally.
Ratio Falling (SPY > RSP): The generals are charging, but the soldiers are retreating. The market is being propped up by a few giants while the average stock suffers. This often signals hidden weakness or a mania in big tech.

SPY is heavily tilted toward Tech and Communication Services. RSP effectively tilts toward Industrials, Financials, and Utilities. A rising ratio often signals a rotation from “Growth” to “Value.”

Limitations

Rebalancing Drag: RSP is forced to sell winners and buy losers every quarter to maintain equal weight. In a powerful momentum market (like the AI boom), this kills your gains because you are constantly selling the best performers to buy the worst ones.
Not a Timing Tool: The ratio can trend down for years (e.g., 2010s Tech dominance). Betting on a reversal just because the line looks “too low” is a widow-maker trade.
Volatility: Counter-intuitively, RSP is usually riskier. By reducing exposure to the cash-rich giants (Microsoft/Apple) and increasing exposure to 400+ smaller, more debt-heavy companies, you actually increase your portfolio’s volatility.

Common Pitfalls

The “Diversification” Trap: You think RSP is “safer” because it’s more diversified. It isn’t. It is just a bet on the Size Factor (Mid-cap vs Mega-cap). If the economy tanks, the smaller companies in RSP usually fall harder than the giants in SPY.
Ignoring Sector Skew: If you use RSP/SPY to time the market, you might just be timing the Tech sector. If Tech crashes, the ratio spikes up—not because the economy is good, but because SPY is imploding.
Assuming Mean Reversion: Many smart investors lost money assuming the “gap” between RSP and SPY must close. Markets can remain irrational (and concentrated) longer than you can remain solvent.