What a Difference a Year Makes: Russell Indexes Reconstitution Highlights Notable changes in the U.S. Equity Market in the Past Year
SEATTLE, WA–(Marketwired – Jun 25, 2014) – As Russell prepares for its annual index reconstitution which concludes at the market close on Friday, June 27, changes to Russell’s U.S. equity indexes since the conclusion of last year’s reconstitution (July 1, 2013) may offer additional insight for investors:
- Lifts
In a year when total market capitalization of the U.S. equity market increased nearly 18% from last year’s reconstitution to $23.2 trillion as reflected by the Russell 3000® Index, the breakpoint between the U.S. small cap Russell 2000® Index and the U.S. large cap Russell 1000® Index hit a new record, increasing 19% year-over-year to $3.1 billion as of May 30 (“ranking day” for this year’s index reconstitution). - Shifts
U.S. equity markets have been led by large-cap stocks since last year’s reconstitution and, while large-cap stocks have continued to lead year-to-date, there has been a shift toward value-oriented stocks and away from growth across both the large- and small-cap tiers. From the completion of last year’s reconstitution on July 1, 2013 through June 19, 2014, the Russell 1000 Index returned 25.1% relative to a 22.6% return for the Russell 2000 Index and growth outperformed value in both indexes for the same time period. In 2014 as of June 14, the Russell 1000 Index (+7.1%) has continued to outperform the Russell 2000 Index (+2.3%), but value outperformed growth in both indexes for the same time period.
- Drifts
Microsoft, the fourth largest U.S. company at this year’s reconstitution, drifted from an exclusively growth-oriented stock to a mix of growth and value. The company, 100% growth-oriented in 2013, is now at a 65%/35% growth to value split. Conversely, Apple is back to its growth roots this year, moving to a 100% growth-orientated stock at this year’s reconstitution from a 76%/24% growth to value split in 2013.
“As the U.S. equity market thaws from its first quarter freeze, 2014 market returns have been choppy; market leadership has also been choppy as exemplified by the shift toward outperformance for value-oriented stocks in recent months,” said Stephen Wood, Russell Investments’ chief market strategist. “We believe it is critical for investors to be able to access market indexes which may provide a more complete and nuanced picture of the U.S. and global investment landscape. Russell’s annual rebalance helps ensure the continued integrity of these index tools.”
In late June, Russell will undergo its annual indexes reconstitution. At reconstitution, the entire Russell family of global indexes will be rebalanced, with every stock within the index experiencing a resclassification to help ensure its market capitalization, style characteristics and index orientation stay current to reflect the curren market environment.
For more information on the Russell Indexes reconstitution, go to the Russell Indexes website.
Please note: Indexes are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment.
Russell’s publication of the Indexes or Index constituents in no way suggests or implies a representation or opinion by Russell as to the attractiveness of investing in a particular security. Inclusion of a security in an Index is not a promotion, sponsorship or endorsement of a security by Russell and Russell makes no representation, warranty or guarantee with respect to the performance of any security included in a Russell Index.
Opinions expressed by Mr. Wood reflect market performance as of June 19, 2014 and are subject to change at any time based on market or other conditions without notice. Past performance does not guarantee future performance.
Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional. The information, analysis and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual entity.
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Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company.
