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Index IDEA: market experts weigh what’s next for US small caps

After declining more than 15% in the first five weeks of 2016 amid a global equity market slowdown, the US small-cap Russell 2000 Index has risen more than 27% from February 11 through August 1 amid a sharp rise in US equity market indexes across a wide spectrum of market capitalizations. The rise for the Russell 2000 Index since February 11 has exceeded that of the US large-cap Russell 1000 Index, Russell Midcap Index and Russell Microcap Index for the same time period.

As market participants use the comprehensive suite of Russell US indexes to measure and capture performance differences across US cap tiers year-to-date, US small-cap experts share their different perspectives on the year-to-date performance and prospects for US small-cap stocks1:  

Russell Rhoads, Director of Education, CBOE Options Institute:

"For most of 2016, the Russell 2000 Index has lagged the performance of the Russell 1000 on a year-to-date basis. For this reason, I believe the fact that the Russell 2000 is up nearly 28% since the US market bottomed in mid-February versus the Russell 1000, which is up just over 19%, has been overlooked by investors. Only recently, with the Russell 2000 taking the year-to-date lead in US market cap index performance, have investors woken up to the stealth rally in US small-cap stocks."


Steven DeSanctis, SMID Cap Strategist at Jefferies & Co.:

"Despite the bounce off the bottom for US small-cap stocks, I remain very cautious on this asset class. Absolute valuations are stretched, earnings growth continues to be weak, and volatility may increase due to the upcoming US election, possible US Fed policy moves and continued investor concerns around Brexit. In addition, I believe a stronger US dollar can be bad for US small caps and, in reality, we may not have a Fed tightening until December at the earliest."


For a closer look at the FTSE Russell Indexes, visit the US Equity Indexes page.

 

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1 Views expressed by Steven DeSanctis and Russell Rhoads are as of August 4 and are subject to change. These are third party views and are not the views or opinion of FTSE Russell or the LSE Group.


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Views expressed by Steven DeSanctis and Russell Rhoads are as of August 4and subject to change. These are third party views and are not the views or opinion of FTSE Russell or the LSE Group.

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No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this IDEA should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

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