Skip to main content

You are here

Blog Listing Page

Experts Dissect US Small Cap Volatility – Highlights from the FTSE Russell Small Cap Summit

By: Rolf Agather,  Managing Director, North America Research

I was fortunate to join an all star panel of experts at our recent FTSE Russell Small Cap Summit, held with the news media at our New York office. For our third annual Summit, we orchestrated a lively panel discussion moderated by Reuters’ markets correspondent Chuck Mikolajczak.

US small cap market volatility was clearly top-of-mind for our panelists and attendees and our experts helped put recent market concerns about volatility into perspective. Heidi Richardson, Head of Investment Strategy for the U.S. at BlackRock iShares, set the stage, describing the first quarter as a “tale of two halves.” By this she referred to the remarkable global market recovery, particularly in US small cap equities, from February 11th through quarter-end, fueled by a more dovish turn by the US Federal Reserve among other factors. Heidi was quick to make the point that while markets may well continue to be volatile for the foreseeable future, US small caps may do better in this environment.

All the talk of market volatility naturally led on to related views from panelist Russell Rhoads, Director of Education for the Options Institute at the Chicago Board Options Exchange, home of the well-known VIX and CBOE Russell 2000® Volatility Indexsm (RVXsm), which measure implied future volatility expectations for US large- and small-cap stocks, respectively. Russell put matters into perspective, saying that the VIX has fallen  to 13 recently, and to reach the long-term average for this measure of US large-cap equity market volatility we need to get closer to 20. Looking at US small-cap equity market volatility, he also pointed out that, the perceived risk level for US small-cap stocks relative to US large-cap stocks has increased, as evidenced by relative price levels for the CBOE Russell 2000® Volatility Indexsm (RVXsm) and the CBOE Volatility Index®(VIX®).

All panelists agreed that, regardless of where small caps go from a volatility and performance standpoint in the coming months, we are definitely heading into a period of further uncertainty in the markets, with a number of unknowns on the horizon, notably Fed policy and the elections. And as we all reinforced the notion that none of us have a crystal ball to help us see into what the future may hold for the markets and investors, I shared some recent studies from FTSE Russell on interest rates and elections and the responses of market indexes. Specifically, we found that, during extended periods of rising interest rates, the Russell 2000® Index (comprising US small-cap stocks) has fallen, but these impacts are shown to lessen over time. In addition, our research tells us that, during times of  election uncertainty, short-term volatility has been experienced by US small-cap stock indexes, but there is no conclusive evidence showing a market preference for certain political parties.


© 2016 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 services marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under license, by FTSE, Russell, MTS Next 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 LSEG 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.

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 CBOE Russell 2000® Volatility Indexsm (RVXsm) or Russell 2000® Index or the fitness or suitability of the indexes for any particular purpose to which they might be put.

No member of the LSEG Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this communication should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective officers, 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 any 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 requires a license from FTSE, Russel, FTSE TMX, MTSNext and/or their respective licensors.

This publication may contain forward-looking statement. These are based upon a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. Such forward-looking statements are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially from those in the forward-looking statement. Any forward-looking statement speak only as of the date they are made and no member of the LSE Group nor their licensors assume any duty to and do not undertake to update forward-looking statements.

Views expressed by panellists are as of April 5th and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the London Stock Exchange Group.

Blog Listing Page