The Russell 2000 had a good year — all things considered. The index has gained 13.7% in 2017 compared to a 19.6% return for the broader S&P 500 index. Both indices are charted in the graph below. But something doesn’t pass the smell test. While both indices have solid gains for the year, it’s interesting to note that most of the Russell 2000’s gains occurred since August 21, 2017, when the index closed at 1356.90. That means that more than 77% of the year’s gains have occurred in just the past 120 days. This is likely a result… Read More
The Russell 2000 had a good year — all things considered. The index has gained 13.7% in 2017 compared to a 19.6% return for the broader S&P 500 index. Both indices are charted in the graph below. But something doesn’t pass the smell test. While both indices have solid gains for the year, it’s interesting to note that most of the Russell 2000’s gains occurred since August 21, 2017, when the index closed at 1356.90. That means that more than 77% of the year’s gains have occurred in just the past 120 days. This is likely a result of an influx of retail investors. While that in and of itself isn’t too troubling, there’s something ominous about the valuation of the small-cap market index of the bottom 2,000 stocks in the Russell 3000 Index. You see, at its current value of roughly 1545, the stocks of the Russell 2000 have a combined value of approximately $4.5 trillion. #-ad_banner-#What’s so ominous about that? Well, the net income from these 2000 stocks is just $42 billion, meaning the Russell 2000 is priced at more than 107 times earnings. It doesn’t matter how you look at the markets today, but any… Read More