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February 21, 2012 at 07:25 AM
“What if a major stock index jumped to an all-time high, but most investors didn’t notice?”
An important question asked and answered by The Wall Street Journal’s Jonathan Cheng. Cheng notes small cap stocks, as measured by the Russell 2000 index, are experiencing just that.
The broad market index of smaller U.S. companies is up an “eye-popping” 36% since early October, and just 4.2% below the record high of 865.29 hit last April. Traditionally more volatile than large cap blue chips, the sector is following the Dow Jones Industrial Average’s recent rally, which broke the 13,000 barrier Tuesday for the first time since 2008.
Maybe it’s investor fatigue over market volatility of the past few years, or more of a focus on asset protection; whatever the reason, the Russell’s record run has had “a tough time attracting new believers in small-cap stocks,” according to Cheng.
“Since May [2011], individual investors have yanked money from U.S. small-cap mutual funds in 37 of 40 weeks,” he writes, citing according EPFR Global. “U.S. small-cap mutual funds have suffered an exodus of $15.9 billion since the end of April, according to Morningstar. Assets at U.S. small-cap exchange-traded funds are down by $4.4 billion.”
