Long Term Perspective

The Russell 2000 posted two declines in the past four years, leading the 10-year average growth to edge down to 10.5 percent in this stock measure in 2001. The Russell 2000 is a benchmark index for the small capitalization sector. It has a longer history than the S&P Small Cap Index and also has a wider base (2000 stocks vs. 600 for the S&P).

Short Term Perspective

Small cap stocks seem to get hit more dramatically than large cap stocks in times of uncertainty (during the 1998 financial crises for instance). However, they also tend to rebound more sharply in economic recovery. Many high tech stocks are included in this index; as a result, it surged in late 1999 and the first half of 2000. This index gets revised each year in July when stocks no longer fitting the "small-cap" criterion are removed from the index. Fast growing high tech companies fit this description in the late 1990s. This index was outperforming other market measures early in 2002, but has since succumbed to the market collapse since the spring.

The Russell 2000, just like the other major indexes, managed to post a gain in November. The index has risen in five of the past twelve months and was initially outperforming the rest of the market in the first half of the year. Unfortunately, that is no longer true.