According to Steve Wood, senior portfolio strategist for Russell Investments, the small-cap Russell 2000 Index reflected the worst January for that market segment since inception of the index. However, a negative return for January doesn’t always signal a negative annual return.
The company also noted some disparity in sector returns for January, pointing relatively good returns for technology, health care and energy.
“The positive returns for December proved short-lived, but stocks in January offered investors some disparity in returns that we didn’t see much of in 2008,” says Wood. “Large caps, for example, outperformed small caps by 3 percentage points and large-cap value outpaced large-cap growth by more than 6 percentage points. In fact, value stocks outperformed growth stocks at every capitalization tier.”
“January was particularly brutal for financial services firms as that sector in the Russell 3000 declined more than15% for the month, and in the mega-cap Russell Top 50 Index it showed a staggering 25% loss for the month.”
“In the past decade, we’ve seen a negative return for the month of January five times, but twice the respective annual return was positive,” says Wood. “In 2003, for example, the broad-market Russell 3000 reflected a decline of 2.45% for January, but by year’s end the annual return was 31.1%.”
L.D.