In 2017, US small cap stock index performance relative to large caps has cooled, with the Russell 2000 Index declining 0.5% as of March 21 as compared to a 5% return for the Russell 1000 Index for the same time period.
Yet this decline in US small cap performance has been accompanied by a steady decline in the CBOE Russell 2000 Volatility Index. The leading US small cap equity market volatility index has declined steadily in 2017, reaching a multi-year low of 14.1 on March 17 and came back to 17.8 on March 21.
Russell Rhoads, director of education, CBOE Options Institute, said:
“The year-to-date performance of the RUT and RVX indexes is telling us an interesting story. On the one hand, after a strong post-election run, US small caps have taken quite a breather in 2017 and US large caps have outperformed. On the other hand, the US small cap volatility index showing the perceived risk for US small cap stocks at a multi-year low could indicate the beginning of a rotation back into small caps. These measures bear close watching in a US equity market driven by sentiment and headlines.”
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