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Russell 2021 Reconstitution Indicates Significant Change

Important Russell Reset 2021 Data

 

The seismic shifts in the markets, as highlighted by the Russell Index reset, will impact individuals, money managers, investment advisors, and funds. Below are Five FTSE Russell facts that demonstrate how different the markets became in a year.

 

  1. The U.S. Stock Market is Worth Much More - According to FTSE Russell, the total U.S. equity market capitalization increased by 52%, leaving it at $48 trillion as of May 2021. This is up from $31 trillion in 2020.
  2.  

  3. Sectors Have Shifted - The Russell 2000 Index saw a large increase in health care, while there was a decrease in consumer discretionary. About half of the 43 IPOs added to the Russell 3000 are health care companies. Within the large-cap Russell 1000, the sector shifts are relatively minor. The technology and consumer discretionary weighting slightly increased.
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  5. Large-Cap and Small-Cap Stocks are Much Larger - As of now, the market cap dividing line from where the small-cap Russell 2000 Index ends and the large-cap Russell 1000 Index begins is $5.2 billion in market capitalization. This number was only $3.0 billion last year. This 73% jump is massive. Entry into the small-cap index last year took $95 million (Limestone Bancorp). This year the smallest company in the Russell 2000 has a market cap of $257 million (Velocity Capital).
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  7. Mega cap Stocks are Mega-mega - There are four companies with more than $1 trillion in market cap. Alphabet (Google) surpassed this level last year and now joins Microsoft, Apple, and Amazon with this distinction.
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  9. Value Has Undeniably Outperformed Growth - The Russell 2000 Value Index returned 79% compared to 50% for the Russell 2000 Growth stocks through May. Comparing large caps, the Russell 1000 Value had a total return of 44% versus the Russell 1000 Growth at 40%.

 

If you're investing in an index, it’s important to make sure the index truly represents the space and sector you are forecasting. The changes since last year have small stocks in the Russell small-cap index much larger than they had been. Also, changes in the size of health care companies and discretionary goods are likely to be pandemic related and could act differently going forward.

 

Suggested Reading:

How Covid and 2020 Investors Monkeyed with the Russell Reconstitution
Why the Smart Money is on the Individual Investor in 2021

 

Sources:

FTSE Russell website.

https://www.barrons.com/articles/changes-in-this-years-russell-index-rebalancing-are-too-big-to-ignore-51624310730?mod=hp_DAY_Theme_1_3

 

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