SOURCE: Russell Investments

Russell Investments

September 06, 2013 13:09 ET

Bridging the Gap: Performance Differential Between Russell 1000® Index and Russell Emerging Markets Large Cap Index at Highest Level in Four Years

SEATTLE, WA--(Marketwired - Sep 6, 2013) -  The Russell 1000 Index has posted a gain of 21.4% for one year as of September 4, 2013 -- significantly outperforming the Russell Emerging Markets Large Cap Index, up 2.2% during the same time period. In fact, the one year trailing outperformance for the Russell 1000 Index versus the Russell Emerging Markets Large Cap Index is at its highest since October 31, 2008 (20.0%). Prior to this, the one year trailing performance gap between U.S. and emerging equity markets peaked on July 31, 2001 (20.4%) and December 29, 2000 (23.8%). 

Yet a closer look at historical trends illustrates that, while emerging markets can be more volatile than U.S. and other developed markets, emerging market exposure and diversification can be an important part of a globally diversified multi-asset investment portfolio.

After reaching one-year trailing performance differential highs relative to the Russell 1000 Index in 2008, 2001 and 2000, the Russell Emerging Markets Index returned 65.76%, (-2.79%) and (-8.24%) during the next 12 months, respectively, outperforming the Russell 1000 Index which posted gains of 11.20%, (-22.8%) and (-12.44%) during these same time periods.

"Taper talk in the U.S. coupled with concerns surrounding China's economic growth have weighed heavily on emerging market equities in 2013," said Gustavo Galindo, emerging markets portfolio manager for Russell Investments. "However, history has shown us that global markets do not always move in tandem and as a result of the recent selloff, relatively attractive valuations are beginning to catch the eye of contrarian investors. For this reason, emerging markets equities should be an important part of a globally diversified multi-asset portfolio."

 
Russell Index Returns - US & Emerging Markets
 
Time Period Russell 1000
Index
Russell Emerging
Markets LC Index
Differential
Year Ending September 3, 2013 21.4% 2.2% -19.2%
Year Ending October 31, 2008 -36.8% -56.4% -20.0%
Following Year 11.2% 65.8% 54.6%
Year Ending July 31, 2001 -14.7% -35.1% -20.4%
Following Year -22.9% -2.8% 20.1%
Year Ending December 29, 2000 -7.8% -31.6% -23.8%
Following Year -12.4 -8.2 4.2%

Source: Russell Investments

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. Galindo reflect market performance and observations as of September 4, 2013 and are subject to change at any time based on market or other conditions without notice. Past performance does not guarantee future performance

Investments in emerging or developing markets involve exposure to economic structures that are generally less diverse and mature, and to political systems which can be expected to have less stability than those of more developed countries. Securities may be less liquid and more volatile than US and longer-established non-US markets.

This material is not an offer, solicitation or recommendation to purchase any security.

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.

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.