While the global equity markets began 2016 on a distinctly negative note, particularly for small cap stocks, further analysis by global index leader FTSE Russell indicates that European small cap stocks, particularly defensive-oriented European small cap stocks, have fared better than dynamic-oriented European small cap stocks and European large cap stocks over time.
The Russell Stability Indexes, otherwise known as the Russell Defensive and Dynamic Indexes, help investors separate companies from the standpoint of quality and volatility. The Russell Defensive Index is designed to include stocks demonstrating a combination of higher quality and lower volatility characteristics over time. The Russell Dynamic Index, on the other hand, includes stocks exhibiting a combination of lower quality and higher volatility characteristics over time.
In 2016 year-to-date as of January 8, as measured by the Russell Stability Indexes, defensive-oriented small cap stocks in Europe have fallen less than their dynamic-oriented counterparts and less than defensive- and dynamic-oriented European large cap stocks. Examining the same set of stocks through the Russell Stability Indexes over a longer period reveals similar trends, with defensive-oriented European small cap stocks taking the lead relative their dynamic-oriented counterparts and relative to defensive- and dynamic-oriented European stocks for the one, three, five and ten year periods ended 8 January 2016.
Catherine Yoshimoto, Index Research Analyst, FTSE Russell:
“The additional level of analysis possible through our defensive and dynamic global indexes helps investors go beyond cap tiers to get a better sense for how different types of companies may perform over different market cycles. In this case, adding a defensive and dynamic lens to a cap tier lens across global equity markets provides a more nuanced view for investors which may help inform their strategy for navigating market volatility across and through a variety of markets.
More research and insights from Catherine Yoshimoto and other FTSE Russell index experts can be found on the new FTSE Russell blog.
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Views expressed by Catherine Yoshimoto are as of January 13, 2016, and are subject to change.
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