Rene Reyna of Invesco describes a tech-focused index ETF that is completely redone each quarter
The artificial-intelligence build-out has dominated the stock market over recent years, but investors' money has shifted as the technology has developed.
During another good year for the stock market, a trend has been reversed. The S&P 500's forward price-to-earnings ratio has declined to 19.5 from 22.2 at the end of 2025, according to FactSet, as its weighted rolling 12-month consensus earnings-per-share estimate has risen 29.4%, more than double the index's gains.
And this brings us to the call of the day from Rene Reyna, head of thematic and specialty product strategy for Invesco's exchange-traded fund and indexed strategies. Invesco manages about 250 ETFs, most of which track specialized stock indexes. Reyna pointed to the Invesco Large Cap Growth ETF PWB as a way to have more concentrated exposure to the largest companies involved with the AI build-out, with that exposure shifting as the AI story unfolds.
PWB has returned 112.7% over the past three years with dividends reinvested, while the S&P 500 SPX has returned 89.8%, according to FactSet. So far this year, PWB has returned 27.4%, while the S&P 500 has returned 14.4%.
Reyna told MarketWatch that the PWB portfolio was 38% to 39% weighted to technology stocks, while the S&P 500 SPX was about 29% weighted to tech.
The PWB portfolio is fully reconstituted during the last month of each calendar quarter as it tracks the Dynamic Large Cap Growth Intellidex Index, which is managed by Intercontinental Exchange, the owner of the New York Stock Exchange.
The index provider begins with the largest 2,000 stocks listed publicly in the U.S. by market capitalization and then scores them using 47 factors within five broad categories: price momentum, earnings momentum, quality (including return on equity and free cash flow margin), management action (including capital spending, stock buybacks and dividend payments), and value (such as revenue to enterprise value, price/book value and cash to equity).
At the end of this quarterly process, the 50 stocks scoring highest are weighted for the index and the PWB portfolio so that the 15 largest by market cap have a combined 50% weighting, with each weighted at 3.33%. Then the remaining 35 stocks are weighted equally.
The top three holdings of PWB are now Intel (INTC), Advanced Micro Devices (AMD) and Meta Platforms (META), which make up 12.8% of the portfolio - and all of which rallied on Monday. The top three stocks in the State Street SPDR S&P 500 ETF Trust SPY are Nvidia (NVDA), Apple (AAPL) and Microsoft (MSFT), which make up a combined 21.2% of that portfolio. So SPY is more concentrated at the top, while the PWB portfolio is more concentrated to tech.
Reyna said stocks recently added to the PWB portfolio included Dell Technologies (DELL) in June and Western Digital (WDC) and Texas Instruments (TXN) in December. Two that had been removed from PWB included Microsoft (MSFT) in June and Sandisk (SNDK) this month after it had been added in June.
When discussing Microsoft in a follow-up email, Reyna wrote that "even an established AI leader can rotate out as the methodology responds to changing fundamentals, valuation, momentum, and other factors." So far this year Microsoft's stock has declined 4%. And the company's free cash flow (cash flow less capital expenditures) for the second calendar quarter declined 23% to $2.64 from $3.42 a year earlier, according to FactSet.
The market
U.S. stock futures (ES00) (NQ00) hugged a tight range while crude-oil futures (BRN00) (CL00) dipped.
Key asset performance Last 5d 1m YTD 1y
S&P 500 7,764.7 1.90% 1.46% 13.43% 16.00%
Nasdaq Composite 27,122.09 3.57% 4.40% 16.69% 19.01%
10-year Treasury 4.949% -5.70 31.50 77.70 84.20
Gold 4,353.7 0.47% -7.68% 0.50% 14.66%
Oil 91.09 -13.64% 12.30% 58.67% 43.11%
Data: MarketWatch. Treasury yield changes are in basis points.
The buzz
The United Nations, now with a fixed escalator, kicks off its general assembly, with all attention on the spiralling war in the Middle East. A report from Kyodo News said Iran is proposing a restoration of Strait of Hormuz traffic within seven days in return for the U.S. lifting the blockade.
The New York Federal Reserve is hosting a Treasury market conference, with speakers including New York Fed President John Williams, Fed Vice Chair Philip Jefferson and Commodity Futures Trading Commission Chairman Michael Selig.
Alibaba (BABA) unveiled its most powerful AI chip yet.
Bill Pulte scrutinized mortgages of Trump's political rivals - and Todd Blanche.
The chart
Oxford Economics increased its inflation forecasts, mostly due to higher-for-longer oil prices but also due to rising food-price inflation. "While our baseline view is still optimistic relative to the consensus, the energy price shock and rising interest rates have created a more unstable backdrop that leaves the economy vulnerable to anything else going wrong," said its chief U.S. economist, Michael Pearce. "Three factors to watch are AI, private credit, and the health of small firms," he said.
Top tickers
Here were the most active stock-market tickers as of 5 a.m. Eastern.
Ticker Security name NVDA Nvidia GME GameStop TSLA Tesla AMD Advanced Micro Devices MU Micron Technology AMZN Amazon.com SPCX SpaceX META Meta Platforms INTC Intel AAPL Apple
-Philip van Doorn