News Column

Cautious Bull: Russell U.S. Indexes Reflect a Defensive Posture Even as US Equity Markets Reached New All-Time Highs

Apr 3 2013 12:00AM



SEATTLE, WA -- (Marketwired) -- 04/03/13 -- U.S. equity markets reached all-time historical highs in the first quarter, as reflected in new all-time historical highs for the Russell U.S. Indexes*.

Yet a closer look at the returns uncovers a more nuanced story, as reflected by the Russell Stability Indexes™, with defensive-oriented stocks delivering the strongest performance for both the year-to-date and the last one, three and five years. The Russell Stability Indexes are style-based benchmarks, created from existing Russell Indexes, which identify stocks based on sensitivity to economic cycles, credit cycles and market volatility, referred to as stability. The more stable half of the market is called Defensive and the less stable half of the market is called Dynamic.

The Russell 1000® Defensive Index, which identifies and measures more defensive-oriented stocks within the Russell 1000® Index of large-cap U.S. stocks, has outperformed both its Dynamic counterpart and the Russell 1000® Index for the YTD, one year, three-year and five-year periods ended March 28th. In addition, the Russell 3000® Defensive Index, which identifies and measures more stable defensive-oriented stocks within the Russell 3000® Index of all-cap U.S. stocks, has outperformed its Dynamic counterpart and the Russell 3000® Index for the same time periods.

"We continue to identify a potential gap between investor sentiment and underlying fundamentals in market pricing," said Stephen Wood, Chief Market Strategist at Russell Investments. "As sentiment and momentum continue to drive the market higher, fundamentals appear not to have changed dramatically. As such, we remain 'guarded' - but simultaneously 'observant' for opportunities. It is interesting to note the arguably guarded undercurrent of this broad market rally, as reflected by the continued outperformance of the Russell Defensive Index over the Russell Dynamic Index for the year-to-date and last one-, three- and five-year time periods. We expect volatility and correlations, in the face of largely unchanged fundamentals, to present an environment that favors security selection and a multi-asset approach."

Russell Index Returns----------------------------------------------------------------------------Index 2013 YTD 1 Year 3 Years 5 Years as of as of (annualized) (annualized) March March as of March as of March 28th 28th 28th 28th----------------------------------------------------------------------------Russell 1000® Index 11.0% 14.7% 13.0% 6.3%----------------------------------------------------------------------------Russell 1000® Defensive Index 11.9% 16.2% 14.0% 6.8%----------------------------------------------------------------------------Russell 1000® Dynamic Index 10.1% 12.6% 11.9% 5.4%----------------------------------------------------------------------------Russell 3000® Index 11.1% 14.7% 13.1% 6.4%----------------------------------------------------------------------------Russell 3000® Defensive Index 11.9% 16.2% 14.1% 6.9%----------------------------------------------------------------------------Russell 3000® Dynamic Index 10.3% 12.8% 11.9% 5.6%----------------------------------------------------------------------------

Source: Russell Investments. Returns are denominated in US dollars.

*The Russell 1000® Index, the Russell 2000® Index and the Russell 3000® Index all achieve new historical all-time price level highs in the first quarter of 2013.

Please note: Indexes are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. Russell's publication of the Indexes or Index constituents in no way suggests or implies a representation or opinion by Russell as to the attractiveness of investing in a particular security. Inclusion of a security in an Index is not a promotion, sponsorship or endorsement of a security by Russell and Russell makes no representation, warranty or guarantee with respect to the performance of any security included in a Russell Index.

Opinions expressed by Mr. Wood reflect market performance and observations as of March 28th, 2013 and are subject to change at any time based on market or other conditions without notice. Past performance does not guarantee future performance

Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional. The information, analysis and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual entity.

Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company.

Source: Marketwire

Story Tools Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters