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Index IDEA: Caught in the SMIDdle

Index IDEA: Caught in the SMIDdle

The “mid” in small and midcap (SMID cap) US stocks have been a key driver this year as reflected by performance for the Russell US Indexes, a change from 2016 when US small cap stocks were clearly the key driver.

The Russell 2500™ Index, which represents the smallest 2500 US stocks of the Russell 3000® Index and therefore combines the US small cap Russell 2000® Index and a portion of the US midcap Russell Midcap® Index, has risen 5.9% in 2017 as of July 7, with the Russell 2000 Index and Russell Midcap Index rising 5% and 7.8%, respectively.[1]

The Russell 2500 Index also had a positive return in 2016 rising 17.6% yet this return came more from the small cap arena. The Russell 2000 Index rose 21.3% in 2016 relative to a 3.8% rise for the Russell Midcap Index.[1]

Steven G. DeSanctis – SMID Cap Strategies, Jefferies & Co., said:

“2016 was notable for smaller cap stocks, especially in the fourth quarter, with the smallest of the small and SMID caps stocks outperforming other major cap tiers. Today, breadth of market performance is lower which has led the smallest names to lag the broad market in the first half of 2017. At the same time, we have seen some significant performing stocks continuing to outperform in the first half of 2017 which impacts the larger names in the indexes.”

Martin Small, Head of U.S. iShares at BlackRock, said:

“The Russell 2500 Index has long been a staple for institutional investors, but lacked a turnkey ETF implementation. SMMD will be the first ETF based on this index to come to the fast-growing ETF market.”

Tom Goodwin, Senior Research Director, FTSE Russell Indexes, said:

“The Russell 2500 Index combines constituents from the US small cap Russell 2000 Index with the 500 smallest constituents within the Russell Midcap Index, making the index an excellent way for investors to measure the performance of the US “SMID cap” segment. The unique blend of the index has always been popular with investors as a benchmark.”

BlackRock iShares recently launched the first new exchange traded fund, or ETF, for retail investors based on the Russell 2500 Index. For more information on the index, go to the Russell US Indexes page.

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[1] Source: FTSE Russell. Data as of July 7, 2017 and derived from the Russell Index performance calculator. Past performance is no guarantee of future results. Please see the end for important legal disclosures.

© 2017 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 TMX Global Debt Capital Markets Inc. and FTSE TMX Global Debt Capital Markets Limited (together, “FTSE TMX”) and (4) MTSNext Limited (“MTSNext”). All rights reserved.

FTSE Russell® is a trading name of FTSE, Russell, FTSE TMX and MTS Next Limited. “FTSE®”, “Russell®”, “FTSE Russell®” “MTS®”, “FTSE TMX®”, “FTSE4Good®” and “ICB®” and all other trademarks and service marks used herein (whether registered or unregistered) are trade marks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, or FTSE TMX.

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 any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for any errors or for any loss from use of this publication or any of the information or data contained herein.

Views expressed by Steven DeSanctis, Martin Small and Tom Goodwin are as of July 12th and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the LSE Group.

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 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.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this IDEA should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any 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 applicable member of the LSE Group. Use and distribution of the LSE Group index data and the use of their data to create financial products require a licence from FTSE, Russell, FTSE TMX, MTSNext and/or their respective licensors.

Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back- tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index.

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