SOURCE: Russell Investments

Russell Investments

September 15, 2014 16:34 ET

Small Cap Growth Spurt: Russell 2000® Index Hints at Shift From Value to Growth Style Leadership in the Third Quarter-to-Date as of September 11, Driven by Healthcare and Technology Sectors; Consumer Discretionary Sector Among Laggards Within the Index for Same Time Period

SEATTLE, WA--(Marketwired - Sep 15, 2014) -  U.S. small cap stocks have experienced a slight shift in style leadership in the third quarter as of September 11, with the Russell 2000® Growth Index (-0.8%) outperforming the Russell 2000® Value Index (-2.2%). This is a change from the first half of 2014, in which the Russell 2000® Value Index (+4.2%) outperformed the Russell 2000® Growth Index (+2.2%). 

During the quarter, the Index has benefitted from strong performances by the Healthcare (+1.8%) and Technology (+0.6%) sectors. And, interestingly, the Consumer Discretionary sector (-2.8%), traditionally a growth-oriented sector, has lagged within the Index for the same time period.

The Energy and Utility sectors within the Russell 2000® Index have done an about face in recent months, going from and 18.3% and 11% return in the first half to a (-11.2%) and (-2.9%) return in the third quarter as of September 11, respectively.

"So far in the third quarter, we have seen some stabilization in growth-oriented strategies that bore the brunt of the recent small cap sell off in the second quarter," said Jon Eggins, senior portfolio manager with Russell Investments.  "Going into 2014, small cap stocks, particularly on the higher growth end of the spectrum, were looking relatively expensive. The significant underperformance of this group in 2014 has tempered this valuation gap. However, within small cap we continue to favor the higher quality, value-oriented market segments."

"Recent style and sector movements as reflected by the Russell 2000® Index help investors to grasp the dynamics of this ever changing market segment," said David Koenig, CFA, FRM, index investment strategist with Russell Investments. "In a year of more pronounced market ups and downs such as 2014, it is important for investors to have access to accurate index tools to help measure and track the continuing evolution of the markets."

Small-Cap Growth Spurt in the Third Quarter as of September 11: Russell Indexes

  Russell Index / Index Sectors 3Q as of Sept 11 First Half 2014
  Russell 2000® Index -1.5% 3.2%
  Russell 2000® Growth Index -0.8% 2.2%
  Russell 2000® Value Index -2.2% 4.2%
  Russell 2000® Index - Consumer Discretionary Sector -2.8% -2.6%
  Russell 2000® Index - Consumer Staples Sector 1.2% 4.9%
  Russell 2000® Index - Energy Sector -11.2% 18.3%
  Russell 2000® Index - Financial Services Sector -0.5% 3.1%
  Russell 2000® Index - Healthcare Sector 1.8% 5.1%
  Russell 2000® Index - Materials & Processing Sector -1.3% 2.6%
  Russell 2000® Index - Producer Durables Sector -3.0% 1.2%
  Russell 2000® Index - Technology Sector 0.6% 1.6%
  Russell 2000® Index - Utilities Sector -2.9% 11.0%

Source: Russell Investments. Returns are total returns (reflect reinvestment of dividends and distributions) and are denominated in U.S. dollars.

For more information on the Russell 2000® Index and the entire Russell Indexes family, go to the Russell Indexes website.

The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.

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. Eggins and Mr. Koenig reflect market performance as of September 11, 2014 and are subject to change at any time based on market or other conditions without notice. Past performance does not guarantee future performance. 

Forecasting is inherently uncertain and may be incorrect. It is not representative of a projection of the stock market, or of any specific investment.

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.