[pyguysf]

In the broader topic of portfolio management, equal weighting will outperform cap weighting due to the small cap effect (read up on Fama-French three factor model). tldr: historically small caps outperform large caps.

In this case, the equal weighting is abstracted away by 1 layer - each ETF is already cap weighted, so you aren't getting the full effect of equal weighting. Instead, you're reallocating to the ETF that has underperformed relative to all others, so as already pointed out, you are betting on reversion rather than momentum.

[im3w1l]

>equal weighting will outperform cap weighting due to the small cap effect

Just because the sector is big doesn't mean the companies in that sector are big.

[pyguysf]

The small cap effect has nothing to do with sectors.

If the sector is big because it has a lot of medium/small sized constituents you gain from this implementation because a cap weighted index would under allocate to these smaller names.