SOURCE: Russell Investments

Russell Investments

July 10, 2015 08:39 ET

Small Caps Feel the Heat: US Small Cap Equity Market Implied Volatility Spikes Amid Growing Global Uncertainty in the Early Days of Summer; FTSE Russell Indexes

SEATTLE, WA--(Marketwired - Jul 10, 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 as of July 7th June 29th, 2015 -
July 7
th, 2015
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.

About FTSE Russell:
FTSE Russell is a global index leader that provides innovative benchmarking, analytics and data solutions for investors worldwide. FTSE Russell calculates thousands of indexes that measure and benchmark markets and asset classes in more than 80 countries, covering 98% of the investable market globally and trading on over 25 exchanges worldwide.

FTSE Russell index expertise and products are used extensively by institutional and retail investors globally. Leading asset owners, asset managers, ETF providers and investment banks use FTSE Russell indexes to benchmark their investment performance and create ETFs, structured products and index-based derivatives.

A core set of universal principles guides FTSE Russell index design and management: a transparent rules-based methodology is informed by independent committees of leading market participants. FTSE Russell is focused on applying the highest industry standards in index design and governance. FTSE Russell is also focused on index innovation and client collaboration as it seeks to enhance the breadth, depth and reach of its offering.

FTSE Russell is wholly owned by London Stock Exchange Group. For more information, visit

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.

© 2015 London Stock Exchange Group companies.

London Stock Exchange Group companies includes FTSE International Limited ("FTSE"), Frank Russell Company ("Russell"), MTS Next Limited ("MTS"), and FTSE TMX Global Debt Capital Markets Inc ("FTSE TMX"). All rights reserved.

Views expressed by Mat Lystra and Russell Rhoads are as of July 9, 2015 and subject to change. In addition, views expressed by Russell Rhoads do not necessarily reflect the views of FTSE Russell or the London Stock Exchange Group.

"FTSE®", "Russell®", "MTS®", "FTSE TMX®" and "FTSE Russell" and other service marks and trademarks related to the FTSE or Russell indexes are trademarks of the London Stock Exchange Group companies and are used by FTSE, MTS, FTSE TMX and Russell under licence.

All information is provided for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but no responsibility or liability can be accepted by the London Stock Exchange Group companies nor its licensors for any errors or for any loss from use of this publication.

Neither the London Stock Exchange Group companies nor any of their licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Russell Indexes or the fitness or suitability of the Indexes for any particular purpose to which they might be put.

The London Stock Exchange Group companies do not provide investment advice and nothing in this communication should be taken as constituting financial or investment advice. The London Stock Exchange Group companies make no representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the London Stock Exchange Group companies. Distribution of the London Stock Exchange Group companies' index values and the use of their indexes to create financial products require a licence with FTSE, FTSE TMX, MTS and/or Russell and/or its licensors.