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Index IDEA: Global investors see bright futures in Russell 2000

As we near the completion of another annual Russell US Indexes reconstitution on Friday, June 22 at the close of US equity markets, US small cap stocks have continued to enjoy strong performance relative to other global equities, as reflected by a 11.8% year-to-date and a 4.6% month-to-date return as of June 20, as measured by the Russell 2000 Index.

And, while US small caps stocks have certainly benefited from the more domestic nature of their business and revenue models relative to US large cap stocks, their strong performance has attracted foreign investment according to new data from FTSE Russell and CME. 

CME Group recently shared figures highlighting steadily growing activity in E-mini Russell 2000 Index futures, which began trading at CME nearly a year ago (July 10, 2017) and recently completed their third quarterly futures roll:

  • June 15 marked the expiration date for the June futures contracts and the end of the roll period (the final date when market participants can roll out of the existing June contracts into the December contract). As of June 15, total open interest for E-mini Russell 2000 Index futures stood at more than 608,000 contracts with an average daily volume of 142,000 contracts.
  • Notably, since the launch of Russell 2000 Index-based futures at CME in July, more than 16,000 new client accounts have been added, and activity in E-mini Russell 2000 Index futures is global, with volume coming from Europe, Asia-Pacific and Latin America regions in addition to North America.

Source: FTSE Russell & CME Group as of June 20, 2018. Past performance is no guarantee of future results. Please see the end for important legal disclosures.

Alec Young – managing director, global markets research, FTSE Russell

“With many of 2018’s equity headwinds being international in nature, the Russell 2000® Index has outperformed the Russell 1000 Index due in large part to small caps’ lower international sales exposure. Being more domestic has insulated small caps from trade tensions, geopolitical worries and the earnings drag stemming from a stronger dollar. Being less global also gives small caps more exposure to several positive factors within the US, including tax reform, increasing deregulation and faster economic growth relative to weaker recoveries in Europe and Japan. All these tailwinds are helping drive faster profit growth for small caps relative to their blue chip counterparts, helping fuel YTD leadership while tempering relative volatility for this asset class.”

 Tim McCourt, CME Group managing director and global head of equity products and alternative investments:

“The strong performance of the Russell 2000 Index continues to reflect the importance of the small cap space in customers’ investment and trading strategies. Given the composition of the index, the Russell 2000 provides a unique tool that is more US-domestic in nature; particularly in 2018 where we have seen certain US economic factors come to light such as stronger economic growth and tax reform. In addition, we have seen growing interest in US small caps by our non-US clients. This has helped drive more geographically diversified sources of volume as participants look to capitalize on the distinct exposure the Russell 2000 provides.” 

For more information on the Russell 2000 Index and index-based derivatives from FTSE Russell, go to the FTSE Russell website.

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© 2018 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global Debt Capital Markets Limited (together, “FTSE GDCM”), (4) MTSNext Limited (“MTSNext”), (5) Mergent, Inc. (“Mergent”), (6) FTSE Fixed Income LLC (“FTSE FI”) and (7) The Yield Book Inc. (“YB”). All rights reserved.

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All information is provided for information purposes only. All information and data contained in this publication is obtained by the LSE Group, from sources believed by it to be accurate and reliable. Because of the possibility of human and mechanical error as well as other factors, however, such information and data is provided "as is" without warranty of any kind. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the accuracy, timeliness, completeness, merchantability of any information or of results to be obtained from the use of the FTSE Russell Indexes or the fitness or suitability of the FTSE Russell Indexes for any particular purpose to which they might be put. Any representation of historical data accessible through FTSE Russell Indexes is provided for information purposes only and is not a reliable indicator of future performance.

Views expressed by Alec Young of FTSE Russell and Tim McCourt of CME Group are as of June 22nd and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the LSE Group.

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