Small Caps Widen Lead Over Large Caps in Quarter

April 06, 2004

Q1 wrap from Russell Indexes.

Small cap stocks continued to outpace other investment styles in the first quarter, and the gap between the small cap Russell 2000 Index (6.3%)and the large cap Russell 1000 Index (1.9%) widened to 4.4 percentage points for the quarter. The gap was only 2.2 points for the fourth quarter of 2003.

'Small and medium capitalization stocks have led large caps now for four consecutive quarters and in general for five years,' said Dave Hintz, senior research analyst.

Overall, Russell's family of 21 indexes reflected a slightly positive quarter for investors with the broad market Russell 3000 Index inching up 2.2%. The other 20 indexes, which track various market segments, showed relatively little disparity in total performance as the top performing index (Russell 2000 Value Index) gained 6.9% while the worst performing index (Russell Top 200 Growth Index) shed 0.3%.

'After a few years of wild ups and downs, the first quarter reminds investors that the markets simply don't deliver large positive or negative returns in a typical quarter,' said Hintz.

The Russell 3000 Growth Index (1.1%) and the Russell 3000 Value Index (3.3%) were nearly equal in performance for 2003, reflecting gains of 31% and 31.1%, respectively, and the value index continued to outperform the growth index by a narrow margin during the first quarter.

Hintz added that ongoing concerns over terrorism, the economy and rising oil prices seemed to squelch investor enthusiasm after a strong start in January. 'Some investors who believe the market's valuation is too high after such strong gains last year have sounded a more cautious note this quarter,' he said.

The Russell 2000, for example, has surged 73% since hitting a low about a year ago (March 11, 2003), while the Russell 1000 has gained 44% during the same period.

Regarding the 12 sectors in the Russell indexes, the more economically sensitive areas were relatively weak for the quarter. In the Russell 3000, for example, autos and transportation (-4.5%), technology (-1.8%) and producer durables (-0.8%) all held the index back.

By contrast, financial services seemed to gain favor with investors in the first quarter as the sector gained 5.3% in the Russell 3000 and 7% in the Russell 2000.

'Many investment managers have told our research analysts that it was difficult this quarter to beat their respective benchmarks by any significant margin because the quarter offered them very little performance disparity in terms of style, sector and even at the individual stock level,' said Hintz. 'They're neither winning big nor losing big even though their actively managed portfolio may look quite different from its benchmark.'

 

Index Name
1Q2004
2003
1 Year
3 Years
5 Years
10 Years
Broad-Market Indexes
Russell 3000 Index
2.23
31.06
38.19
1.95
0.14
11.45
Russell 3000 Growth Index
1.14
30.97
34.15
-1.22
-5.54
9.42
Russell 3000 Value Index
3.33
31.14
42.45
5.14
4.73
12.6
Large-Cap Indexes
Russell 1000 Index
1.9
29.89
36.37
1.26
-0.56
11.66
Russell 1000 Growth Index
0.79
29.75
32.18
-1.74
-6.13
9.79
Russell 1000 Value Index
3.03
30.03
40.82
4.31
3.89
12.61
Russell Top 200 Index
0.78
26.68
31.78
-1.23
-3.28
11.48
Russell Top 200 Growth Index
-0.26
26.63
28.01
-3.3
-7.94
10.19
Russell Top 200 Value Index
1.99
26.75
36.35
1.24
1.15
12.16
Mid-Cap Indexes
Russell Midcap Index
5.14
40.06
50.83
9.18
8.42
13.08
Russell Midcap Growth Index
4.83
42.71
49.63
5
2.29
10.27
Russell Midcap Value Index
5.35
38.07
51.6
11.71
10.57
13.96
Small-Cap Indexes
Russell 2000 Index
6.26
47.25
63.83
10.9
9.66
10.44
Russell 2000 Growth Index
5.58
48.54
63.16
5.4
2.31
6.45
Russell 2000 Value Index
6.92
46.03
64.49
16.02
16.14
13.61
Russell 2500 Index
5.88
45.51
60.64
11.97
11.74
12.63
Russell 2500 Growth Index
5.5
46.32
59.47
6.81
5.17
8.94
Russell 2500 Value Index
6.18
44.93
61.59
15.79
15.19
14.5
Russell Small Cap Completeness Index
5.44
42.89
55.54
8.45
5.66
10.68
Russell Small Cap Completeness Growth Index
5.19
45.11
56.21
3.78
-0.07
7.78
Russell Small Cap Completeness Value Index
5.66
41.03
55.02
12.59
10.98
13.28

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