FTSE Russell recently hosted market and derivatives experts from FTSE Russell, Jefferies, CME Group and Cboe Global Markets in a special webinar focused on US small cap equity market volatility amid the global pandemic. In the webinar for clients and the news media, moderated by Sean Smith, managing director of index derivatives licensing, FTSE Russell, the group shared perspective on the current state of the US small cap equity market and US small cap index derivative tools and approaches to address opportunities and manage downside risk.
Steven DeSanctis, US small & mid cap equity strategist, Jefferies:
“It's been three steps up, one step back for US small caps this year, but looking a historical experience small caps have traditionally outperformed, coming out of recession and economic downtowns. Three key positive indicators to watch for this asset class include narrowing high yield spreads, change in investor sentiment toward US small caps and broad economic indicators of a second half rebound.”’
Tim McCourt, MD, Global Head of Equity Index & Alternative Investment Products, CME Group:
“Since their return to CME Group in 2017, we have seen growing use of Russell 2000 futures by investors looking to manage downside risk and pursue upside opportunity in US small caps. In the first quarter, heightened volatility and an increased need to hedge price risk contributed to record volume and broadening interest in futures based on the Russell 2000 at CME Group. It is also important to note that this growing interest came from US as well as international investors.”
Kevin Davitt, senior instructor, The Options Institute at Cboe Global Markets:
“You can’t rewrite history, but you can reshape your investment experience with respect to market volatility through the use of index-based derivatives. Recent experience helps show us the potential value of index-based derivatives to actively manage market risk. For an extra cost, index-based options can be quite useful for investors, helping manage cash flow, reduce risk, leverage market exposure and generate income. Options afford us choices and give us flexibility as we are making observations and decisions around potential market direction.”
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