Market experts from leading global index provider FTSE Russell and CME Group recently gathered to share their insights on US small cap equities in 2020, including opportunities and risks on the horizon and how investors can use index-based investment products to optimize exposure to this important asset class.
This lively webinar discussion examined the US small cap equity market from a long-term macroeconomic viewpoint as well as a bottom-up fundamental perspective, touching on major factors that may come into play in 2020 as investors navigate the US election, an uncertain global growth environment, historically elevated valuations and geopolitical concerns.
Alec Young – managing director, global markets research, FTSE Russell:
“The Russell 2000 Index notched a healthy 25% total return in 2019. In terms of what 2020 may have in store, the domestic economic picture looks good, financial conditions remain highly accommodative and leading indicators globally are at levels consistent with prior positive inflections, all of which bode well for small caps - an economically sensitive asset class. However, the sudden coronavirus outbreak and the growth fears it has sparked are a reminder that periodic bouts of volatility represent a normal and inevitable part of investing. Other potential short-term risks include historically high valuations and looming electoral uncertainty. As such, we are excited to work with CME to bring investors high quality, Russell 2000 risk management tools.”
Erik Norland – senior economist, CME Group:
“Historically, US small- and large-cap stocks have had similar returns, but these returns have varied quite significantly during different economic cycles. While large caps have tended to do well during periods of sustained economic growth and have performed well in recent years during a late stage bull market, small caps have done well in times of market volatility. If we see heightened market volatility and some economic slowing later in 2020 and into 2021 and experience a turning point in the economic cycle, we may see US small caps begin to dominate.”
Tim McCourt – managing director and global head of equity products and alternative investments, CME Group:
“Since returning to CME Group in 2017, futures and options based on the Russell 2000 Index have enjoyed very strong volume growth despite being in a period of low relative volatility. And our Micro E-mini Russell 2000 futures, launched in May of last year, have had very strong growth as we see more individual investors taking advantage of a lower notional price. This all speaks to strong investor interest in US small caps and in products that can help manage risk in this area.”
A full replay of the webinar is available for those who would like to hear Alec, Erik and Tim’s insights in more detail. For more information about the Russell 2000® Index, please visit the FTSE Russell website.
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