The US large-cap Russell 1000® Index has risen 20.5% in 2019*, strongly outpacing the US small-cap Russell 2000® Index, which has returned 14.1% year-to-date.
Further examination through the lens of the Russell Defensive & Dynamic Indexes shows defensive-oriented stocks as a key driver among both large and small caps. The Russell 1000® Defensive Index has returned 22.4% in 2019 as compared to an 18.6% return for its Dynamic counterpart. And the Russell 2000® Defensive Index has returned 16.2% in 2019 as compared to a 12% return for the Russell 2000® Dynamic Index.
This performance relationship holds over longer time periods, as well.
Alec Young, FTSE Russell managing director of global markets research
“Several macroeconomic drivers have been fueling the strong outperformance of defensive stocks over their cyclical counterparts. The biggest has been widespread fears of slowing global growth which has only been exacerbated by seemingly endless US-China trade tensions. This has led companies in defensive, counter-cyclical businesses to lead more economically sensitive stocks.
In addition, worries about the health of the global economy have driven interest rates to record lows around the world. Given that companies in defensive sectors like utilities, consumer goods, telecommunications and real estate generally sport higher dividend yields than their cyclical counterparts, falling interest rates have helped drive defensive stock leadership.
Investors looking for cues on better cyclical stock performance may want to focus on the outlook for global growth and the direction of long term interest rates. If confidence in growth improves and interest rates begin to head higher it’s logical to assume cyclical stock performance may become more competitive.”
Catherine Yoshimoto, FTSE Russell director, product management
“More sophisticated index tools and market data from FTSE Russell can provide further insight into key drivers in the global equity markets. Whether looking at market capitalization, investment styles, market factors or, in this case, defensive and cyclical (dynamic) stock performance during periods of heightened volatility, investors can benefit from having a more nuanced lens into how the equity markets are moving.”
For more information about the Russell US Indexes, visit the FTSE Russell website.
*Index returns as of September 9, 2019. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
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