US small-cap stocks have continued to outpace their large-cap counterparts, with the Russell 2000® Index up nearly 10% in the month of February relative to a 6.5% rise for the US large-cap Russell 1000® Index. This same performance trend holds true for YTD and one-year comparisons between the two indexes.
Interestingly, this surge in US small-cap market performance has been accompanied by an increase in relative volatility. The daily closing price of the Cboe Russell 2000 Volatility IndexSM, or RVX, which measures 30-day expected volatility for the US small-cap market, has averaged just over 32 since the beginning of 2020, a full 12 points higher than its five year average of 21.4.
Philip Lawlor, managing director, Global Investment Research, FTSE Russell:
“US small-cap stocks have continued their winning streak in 2021, riding the early ‘blue wave’ optimism triggered by the new Biden administration’s aggressive fiscal stimulus proposals and the burst of online retail buying in a handful of small-cap stocks.”
Rick Rosenthal, director, business development, Cboe Global Markets:
“As US small cap stocks have continued to rally in the past year, accelerating their upward climb in recent months, we have seen the US small cap volatility remain elevated as reflected by the average closing price levels of the Cboe Russell 2000 Volatility Index (RVX). Typically, volatility levels go down when markets rise, so the fact that perceived market volatility levels remain high reflect continued market uncertainty. In this environment, we are seeing growing interest by investors in having additional and more broadly accessible options tools to help address this volatility and market opportunity. The upcoming introduction of mini-Russell 2000 Index Options, with a smaller notional value than the standard Russell 2000 Index Option used by traders today, reflect this growing market demand.”
Philip Lawlor shares more perspective on US small-cap equity performance as reflected by the Russell 2000 in a recent FTSE Russell blog. And you can go to the FTSE Russell website for more information on derivatives based on FTSE Russell indexes.
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