{"id":25373,"date":"2025-09-25T07:30:00","date_gmt":"2025-09-25T11:30:00","guid":{"rendered":""},"modified":"2025-09-24T15:19:21","modified_gmt":"2025-09-24T19:19:21","slug":"introducing-the-weight-watchers-swap-strategy","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/introducing-the-weight-watchers-swap-strategy\/","title":{"rendered":"Introducing the Weight Watchers Swap Strategy"},"content":{"rendered":"
\n

Managing Editor’s Note:<\/strong> Today, we’re hearing from our contributing editor Mike Burnick in his weekly Thursday feature.<\/p>\n

 Mike has over 30 years in the investment and financial services industry – from operating as a stockbroker, trader, and research analyst, to running a mutual fund as a registered investment advisor and portfolio manager, to being Research Director for the Sovereign Society, specializing in global ETF and options investing.<\/p>\n

 And he’s been senior analyst at TradeSmith for three years, running Constant Cash Flow, Infinite Income Loop, <\/em>and Inside TradeSmith<\/em>.<\/p>\n

 Here’s Mike…<\/p>\n<\/div>\n

Introducing The Weight Watchers Swap Strategy<\/h2>\n

BY MIKE BURNICK, CONTRIBUTING EDITOR, MARKET MINUTE<\/em><\/strong><\/p>\n

When it comes to making money, investors really have to watch their weight.<\/p>\n

No, I don’t mean watching what you eat and getting plenty of exercise. I’m talking about how you weight your investment portfolio.<\/p>\n

Wall Street is fond of creating perceived needs in investors’ minds and then building new products to fill those needs.<\/p>\n

That’s why there are lots of funds and ETFs with interesting ways to weight the S&P 500 Index.<\/p>\n

Some are weighted according to fundamental factors like earnings or dividends. Others are weighted by investment style, like growth vs. value.<\/p>\n

Then there is the SPDR S&P 500 Trust ETF (SPY), which is weighted by market capitalization. And the Invesco S&P 500 Equal Weight ETF (RSP), where every stock has an equal weight.<\/p>\n

Currently, SPY is leading. That’s because the popular Magnificent 7 stocks and a few others account for nearly 40% of SPY holdings.<\/p>\n

But that hasn’t always been the case.<\/p>\n\n

\"\"<\/figure>\n\n

Over time RSP and SPY are practically neck and neck in overall performance as you can see above. But look closer, and you’ll see they take turns leading and lagging.<\/p>\n

SPY has been leading since 2023, driven by the explosive growth of the Mag 7. But I believe RSP may soon take the lead in performance.<\/p>\n

That’s because Mag7 earnings growth is slowing relative to the “average stock” in the index.<\/p>\n\n

\"\"<\/figure>\n\n

And if these heavy weight<\/em> stocks that dominate SPY no longer have superior profit growth, then their sky-high valuations could suffer. Investors should look to swap into more of the “average stocks” instead.<\/p>\n

And it turns out there is an easy way to trade the periodic swap in leadership, based on research from SentimenTrader.<\/p>\n\n

\"\"<\/figure>\n\n

This chart is simply a ratio of RSP\/SPY (blue line).  You can see RSP led the way from 2020 to 2023, but SPY has been in the lead since then.<\/p>\n

The red line in the chart is a 16-week exponential moving average of the RSP\/SPY ratio. And it can be used as a buy\/sell signal.<\/p>\n

    \n
  • So, when the blue line is rising above the red moving average line, the equal weight S&P is leading, and you should consider buying RSP.<\/li>\n
  • And when the blue line is falling below the moving average, the market-cap weighted S&P is leading, and you should consider buying SPY.<\/li>\n<\/ul>\n

    This simple weight watchers swap strategy<\/em> can pay off for you in extra profits, too. In fact, you could have outperformed a buy-and-hold strategy that invests equally in both RSP and SPY by a factor of 2-to-1 over the last 35 years.<\/p>\n

    Bottom line<\/em><\/strong>: Right now, the market-cap weighted SPY is still in the lead. But keep a watchful eye on its performance relative to the equal weight RSP. As the rally rolls on, I expect it will broaden to more than the Mag 7. That means the average stock should soon play catch up, leading to another change favoring RSP.<\/p>\n\n

    Good investing,<\/p>\n

    \"Signature\"<\/p>\n

    Mike Burnick
    \nContributing Editor, Market Minute<\/em><\/p>\n\n\n","protected":false},"excerpt":{"rendered":"

    Investors: watch how you weight your investment portfolio.<\/p>\n","protected":false},"author":100,"featured_media":0,"comment_status":"closed","ping_status":"0","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[155],"newsletter-type":[],"ticker":[],"class_list":["post-25373","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-mike-burnick"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/25373","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/100"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=25373"}],"version-history":[{"count":2,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/25373\/revisions"}],"predecessor-version":[{"id":25382,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/25373\/revisions\/25382"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=25373"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=25373"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=25373"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=25373"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=25373"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=25373"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=25373"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}