Get ready for a broader market

The investment outlook suggests a favorable environment for market breadth improvement, driven by a global rate-cutting cycle, stable to improving real GDP, and accelerating earnings growth. These conditions are expected to reduce index concentration as investors explore diverse opportunities across different styles and capitalization sizes. As 2025 begins, these factors are in place, supporting continued market rotation that started in July 2024.

The robust economy and improving forward earnings power suggest that the significant outperformance of growth over value will moderate, with breadth likely to improve across the capitalization spectrum. Small- and mid-cap stocks are anticipated to perform alongside large-cap stocks, creating a bullish environment for the "average stock."

Historically, the S&P 500 Equal Weight Index has outperformed the capitalization-weighted S&P 500 Index under conditions of lower interest rates, higher liquidity, GDP recovery, and accelerating EPS growth. This trend underscores the potential for diversified investment strategies to yield positive returns in the current economic landscape.