SOURCE: Russell Investments

Russell Investments

October 30, 2013 15:45 ET

U.S. Small-Cap Stocks Have Reached All-Time Highs Amid Historically Low Levels of Volatility, According to Russell Indexes

SEATTLE, WA--(Marketwired - Oct 30, 2013) - While U.S. small-cap stocks have continued to reach all-time highs in 2013, U.S. small-cap market implied volatility is at or near record lows, according to Russell Indexes.

The U.S. small-cap Russell 2000® Index has traded at or near record highs in 2013 and returned 33% year-to-date as of October 25th. The CBOE Russell 2000 Volatility Index (RVX), which measures U.S. small-cap market implied volatility, has traded at or near record lows in 2013, reaching its all-time historical low of 13.65 on March 14th, and closed Friday, October 25th at 15.96. This is ten points below its historical average of 26.55 and 71 points below its historical high of 87.62 reached November 20th, 2008.

"By measuring near-term U.S. small-cap implied volatility conveyed by Russell 2000 Index option prices, the CBOE Russell 2000 Volatility Index can serve as a leading barometer of small-cap investor sentiment and market volatility. For this reason the RVX can serve as a useful tool for many types of investors," said Patrick Fay, director of listed derivatives for Russell Indexes.

"The U.S. small-cap 'fear gauge' is hovering close to all-time lows while U.S. small-cap stocks as reflected by the Russell 2000 Index are testing all time highs in 2013, reflecting improving investor sentiment. U.S. small-cap stocks appear to have benefited from a grinding, low inflation U.S. economic recovery and modest earnings outlook that balances against ongoing political risks and a glacially improving labor market -- and thus the expectation that the Fed will keep monetary policy accommodative for some time to come," said Stephen Wood, Russell Investments chief markets strategist.

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. Wood & Mr. Fay reflect market performance and observations as of October 25, 2013 and are subject to change at any time based on market or other conditions without notice. Past performance does not guarantee future performance. 

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.