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FTSE Russell Announces Details of 2018 Reconstitution

Traders Magazine Online News, June 11, 2018

John D'Antona Jr.

FTSE Russell, a leading global index, data and analytics provider, posted its official preliminary lists of companies set to enter or leave the US broad-market Russell 3000® Index and the Russell Microcap® Index when the Russell US Indexes complete their annual rebalance after US equity markets close on Friday, June 22. The lists of projected additions and deletions for the Russell US Indexes are now available on the FTSE Russell website.

Each June, the entire family of Russell US Indexes is realigned and recalibrated to reflect market changes in the last year. Approximately $9 trillion in assets under management (AUM) are benchmarked to or invested in products based on the Russell US Indexes, underscoring the importance of reconstitution to investors and the markets. $16 trillion in assets are currently benchmarked to indexes offered by FTSE Russell*.

Alec Young, Managing Director of Global Markets Research, FTSE Russell, said:

“While market volatility has increased YTD relative to 2017’s historic calm, economic growth, strong corporate fundamentals and still benign Fed monetary policy have largely offset geopolitical uncertainty, including around trade, as well as concern about higher interest rates. With many of 2018’s equity headwinds being international in nature, the Russell 2000 Index has outperformed the large-cap Russell 1000 Index, in large part due 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 US market positives including tax reform, increasing deregulation and faster US 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.”

Rolf Agather, Managing Director of US Applied Research, FTSE Russell, said:

“The annual rebalance of the Russell US Indexes is an important process for investors and a closely watched event in the US market. A successful reconstitution every year in June is an important part of maintaining integrity, transparency and relevance for our Russell US Indexes and ensuring they remain an important tool for investors to accurately measure markets and achieve comprehensive exposure across asset classes, market capitalization tiers and style designations.”

US Equity Markets Take Volatility in Stride, Have Continued Their Climb

As of May 11, the rank day for the 2018 Russell US Indexes reconstitution, the total market capitalization of the US equity market as reflected by the Russell 3000 Index is $30.7 trillion, a nearly 13% rise from the 2017 reconstitution. The total market capitalization of the US large-cap Russell 1000 Index stands at $28.2 trillion, a 13% increase since 2017 reconstitution and the total market capitalization of the US small-cap Russell 2000 Index is $2.5 trillion as of May 11, a 9% increase from last year. Furthermore, the closely watched breakpoint between the Russell 1000 and Russell 2000 has risen 9% this year to $3.7 billion.

Small Caps Turn the Tables on Large Caps, With Russell 2000 Index Outdistancing Russell 1000 Index

Small caps have been very strong in the last year, particularly 2018 year-to-date, outperforming large caps. Through the end of May 2018, the Russell 2000 Index has risen 6.9% in 2018 as compared to a 2.2% return for the Russell 1000 Index. Key sector drivers of Russell 2000 Index performance in the last year include Health Care (+44.3%), Consumer Discretionary (+21.6%) and Technology (+20.5%).

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