The Motley Foolยท2025-08-31 09:32Core Viewpoint - The S&P 500 has rebounded significantly after a decline in 2022, increasing over 68% since the start of 2023, but it is now trading at historically high levels, raising concerns about potential declines in the future [1][3]. Group 1: S&P 500 Performance - The S&P 500 index declined by over 19% in 2022 but has since experienced a bull run, increasing by over 68% in 2023 [1]. - The index is currently trading at historically high levels based on the Shiller price-to-earnings (P/E) ratio, which has historically preceded sharp declines [3]. Group 2: Investment Strategies - Investors may find the high valuation of the S&P 500 alarming, but an alternative investment strategy is to consider an equal-weight ETF, such as the Invesco S&P 500 Equal Weight ETF [5]. - The equal-weight S&P 500 ETF allows for a more balanced exposure to the index, as each company accounts for roughly the same amount, unlike the standard S&P 500, which is weighted by market capitalization [6]. Group 3: Concentration of Holdings - A small number of tech stocks, referred to as the "Magnificent Seven" (Nvidia, Microsoft, Apple, Amazon, Alphabet, Meta, and Tesla), now account for over a third of the standard S&P 500 index [7]. - In the equal-weight S&P 500, these stocks only account for 2.18%, reducing the risk associated with their high concentration in the standard index [7]. Group 4: Historical Performance Comparison - Over the past decade, the standard S&P 500 has outperformed the Invesco S&P 500 Equal Weight ETF, rising 233% compared to the ETF's 153% [10]. - However, since the ETF's inception in April 2003, it has outperformed the standard S&P 500, particularly during market rallies and recoveries [12]. Group 5: Current Market Conditions - Given the current overvaluation of the S&P 500 and historical trends when it reaches such levels, it may be prudent for investors to hedge against the reliance on the "Magnificent Seven" stocks [13].