Small Caps Feel the Summer Heat

Equity Market Implied Volatility Spikes Amid Growing Global Uncertainty

SEATTLE, WA–(Marketwired – Jul 13, 2015) – While U.S. small cap stocks are still up 4.2% year-to-date as of July 7, they have lost 2.6% since June 29, when Greece shut its banks and imposed capital controls and amid growing market uncertainty in China, suggesting that an index consisting primarily of US-oriented companies is not immune to the current global market tensions.

In fact, while all U.S. stocks are in negative territory in recent weeks, the 2.5% loss for the U.S. small-cap Russell 2000® Index during this period is greater than the 0.9% loss for the U.S. large-cap Russell 1000® Index.

In addition, the CBOE Russell 2000 Volatility Index(SM) (RVX(SM)), which measures implied near-term volatility for U.S. small cap stocks as reflected in the closing prices of near-term Russell 2000® Index options, spiked almost 27% from a closing level of 16.18 on June 26 to a closing level of 20.5 on June 29, a level not seen since February 11 of this year.

The Index had a closing level of 19.4 on Tuesday, July 7.

Mat Lystra, senior research analyst with FTSE Russell, said:

"In recent weeks, market participants have focused primarily on headlines outside the U.S. in markets like Greece and China. The historical perception that U.S. small caps may be less susceptible to international market forces than U.S. large caps given that they tend to derive a larger percentage of their revenue from inside the U.S. than their large cap counterparts has not been supported by recent index performance. This is one of those periods where all boats may rise and fall based on the political tides in far off markets."

Russell Rhoads CFA, Director at The Options Institute at CBOE, said:

"We have observed increased volatility in U.S. domestic stocks amid heightened global volatility.

In particular, the implied risk of U.S. small caps has increased to levels that haven't been reached since the early days of 2015. So, while U.S. small cap performance is still up relative to U.S. large cap performance year-to-date, the market may be telling us something in recent weeks about where small caps may go from here."

For more information on the Russell Indexes and the Russell 2000 Index, go to the FTSE Russell website.

For more information on the CBOE Russell 2000 Volatility Index(SM) (RVX(SM)), go to the CBOE website.

Russell Index                    2015 YTD          6/29/15- 7/7/15 
Russell 2000® Index               4.2%                 -2.5%
Russell 1000® Index               2.6%                 -0.9%

Source: FTSE Russell Indexes. Total returns, US dollar denominated. Past performance is no guarantee of future results.

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