SOURCE: Russell Investments

Russell Investments

February 04, 2015 15:04 ET

Oil Drops & Market Pops: US Equity Markets Have Declined Along With Oil Prices in Recent Sharp Drops, but Have Rebounded in the Following 12 Months, According to Russell Indexes

SEATTLE, WA--(Marketwired - Feb 4, 2015) - The U.S. equity market, as reflected by the U.S. large cap Russell 1000® Index and the U.S. small cap Russell 2000® Index, has been in the red in two recent periods in which the price of oil declined by more than 30%*, but has increased sharply in the subsequent twelve months. And this trend has been reflected even more acutely by the Russell Stability (Defensive & Dynamic) Indexes, which measure a portion of the market based on sensitivity to economic cycles, credit cycles, and market volatility, referred to as stability.

From July 1, 2008 through January 30, 2009, U.S. large and small cap stocks both lost more than 35% as illustrated by the Russell 1000 & Russell 2000 Indexes. For this same time period, dynamic-oriented stocks within these indexes declined more sharply than defensive-oriented stocks. In the following twelve months, from February 1, 2009 through January 31, 2010, these same stocks rebounded sharply with dynamic-oriented stocks leading the way.

From May 1, 2011 through September 30, 2011, U.S. large and small cap stocks lost 17.1% and 25.1%, respectively, as illustrated by the Russell 1000 & Russell 2000 Indexes. And, for this same time period, dynamic-oriented stocks within these indexes declined more sharply than defensive-oriented stocks. In the following twelve months, October 1, 2011 through September 30, 2012, these same stocks rebounded sharply with dynamic-oriented stocks leading the way. 

From July 1, 2014 through January 26, 2015, oil prices declined nearly 60% and U.S. equity markets have been challenged, though not as much as in previous significant oil price decline environments.

Tom Goodwin, CFA - Senior Research Director, Russell Indexes

"While past performance of course is no guarantee of future performance, past index returns can put some context around current market events. The sharp decline in the price of oil is one such event, and by utilizing a blend of Russell's traditional market capitalization weighted and newer alternatively weighted indexes, investors can gain greater insight into where the market has been and where it might go in the future." 

For more information on the Russell 1000 and Russell 2000 Indexes, along with the Russell Stability Index Series, go to the Russell Indexes website.

 
US Equity Markets & Oil - Russell Indexes
 
 Oil Price Drops > 30%   Russell 1000®
Index
  Russell 2000®
Index
  Russell 1000® Defensive Index®   Russell 1000®
Dynamic Index®
  Russell 2000®
Defensive Index®
  Russell 2000®
Dynamic Index®
 7/1/08 - 1/30/09 (-70.4%)   -35.4%   -35.1%   -25.3%   -46.2%   -28.2%   -42.2%
 5/1/11 - 9/30/11 (-30.2%)   -17.1%   -25.1%   -10.3%   -23.0%   -18.3%   -31.6%
 12 Months Later                        
 2/1/09 - 1/31/10   34.8%   37.8%   23.1%   50.6%   25.9%   51.9%
 10/1/11 - 9/30/12   30.1%   31.9%   27.5%   32.9%   29.3%   34.8%
 Last Seven Months                        
 7/1/14 - 1/26/15 (-57.8%)   5.8%   1.4%   7.3%   4.3%   4.5%   -1.7%

Source: Russell Indexes Online Calculator. Total returns, US dollar denominated.

*Oil price movements determined by West Texas Intermediate (WTI) prices via St. Louis Fed; July 1, 2008 - January 30, 2009 = 70.4% decline, May 1, 2011 through September 30, 2011 = 30.2% decline and July 1, 2014 through January 26, 2015 = 57.8% decline.

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.

Russell Investments is the owner of the trademarks, service marks and copyrights related to its respective indexes. Opinions expressed by Mr. Goodwin reflect market performance as of January 26, 2015 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 Investments is a Washington, USA corporation, which operates through subsidiaries worldwide and is a subsidiary of London Stock Exchange Group.

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