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Index IDEA: US microcap stocks have lost ground in open presidential elections

The Russell Microcap Index, which measures the 1,000 smallest companies in the US small-cap Russell 2000 Index plus 1,000 smaller US-listed stocks, has recorded an index return of 6.8% on an annualized basis in the last 15 years while generally displaying a wider variation of returns than indexes measuring larger US cap tiers.

As the US rapidly moves toward its next general presidential election, FTSE Russell examined the historical backtested performance of the Russell Microcap Index in more detail, finding that election year returns have been particularly variable for US microcaps. Specifically, general election years featuring an incumbent, notably 2004 and 2012, have been much kinder to microcaps than “open election” years featuring an entirely new slate of candidates, notably 2008 and thus far in 2016.

Catherine Yoshimoto, senior index product manager, FTSE Russell:
“Whether it is about ‘hope and change’ as then candidate Barack Obama pledged in 2008, or presumptive nominees Donald Trump pledging to ‘make America great again’ and Hillary Clinton’s ‘fighting for us’ in our current general election campaign, market indexes tend to reflect the market anxiety and uncertainty that is a natural by-product of political change. And while four presidential elections years don’t necessarily make a definitive trend, index returns indicate that market uncertainty has not been kind to the smallest listed US companies.”

Russell Microcap Index Annual Returns, 2001-2016 YTD: FTSE Russell Indexes

Source: FTSE Russell, data as at 18 May 2016. Past performance is no guarantee of future returns. Some index returns, including those prior to the index inception date, reflect hypothetical historical performance. Please see the disclaimer for important disclosures.

For more information, visit www.ftserussell.com.

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Views expressed by Catherine Yoshimoto are as of May 18 and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the LSE Group.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the Russell Microcap® Index or the fitness or suitability of the indexes for any particular purpose to which they might be put.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this IDEA should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

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Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back- tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index.

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