Indexes Bounce Back in 2009

The Russell 3000 index, which measures approximately 98% of the investable U.S. equity universe, reflects what its sponsoring firm terms a “remarkable turnaround” for stocks in 2009, including an especially strong surge for growth stocks relative to value stocks.  According to a press release, amid the across-the-board positive returns for Russell’s family of U.S. equity benchmarks, the growth/value disparity particularly among midcaps stands out as perhaps the headline of the year.      

Rough Start

At the start of the year, the Russell 2000 index reflected the worst January for the small-cap segment since inception of the index, and it would only get worse until the entire U.S. equity market, as reflected in the Russell indexes, reached its lowest point year-to-date on Monday, March 9, 2009 and total returns began to grow.  March was the first month in 2009 to post positive total returns for the Russell 3000, Russell 1000 and Russell 2000 indexes, although Q109 returns would still end negative, according to Russell.      

By April, the small-cap Russell 2000 index illustrated an increase of 15.5%, and hit the second-largest monthly gain in 30 years of available data. In fact, every segment of the U.S. equity market measured by Russell indexes added value for the month of April, ranging from 10.5% for the Russell 3000 index to 10.1% for the Russell 1000 index, according to a press release.      

However, even with large gains in April, the U.S. equity market (as mirrored by the Russell indexes) were still far from recovered.  At the Russell indexes annual reconstitution on Friday, June 26, the total market capitalization of the Russell 3000 index reflected a 35.8% decline for the U.S. broad market for the past year, dropping from $16.5 trillion at reconstitution in 2008 to $10.6 trillion at reconstitution in 2009.  This was 42.7% below the 2007 high of $18.5 trillion, and it marked the first time since 1997 that the newly reconstituted index reflected less than $11 trillion.      

After reconstitution, the Russell 3000 index continued to indicate positive growth throughout all cap-tiers of the market, turning out positive total returns for the third quarter, even after a dip into negative territory for all three major indexes in October 2009.  By November 2009 the broad market Russell 3000 index and large-cap Russell 1000 index continued to climb and broke their 52-week high, just over one year after the close of Lehman Brothers. 

Of course, as good as 2009 has been for those indexes – it’s not yet enough to restore the 2008 losses.