Trend Analysis Using ETFs – Part 1

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 Since October, 2020, there has been rotations in the stock market with anticipation of the economy reopening. There was movement of funds into small to mid-cap companies, especially the ones that were depressed for major part of the 2020 and would benefit from the reopening. Then in early 2021 when the $1.9T stimulus became a near certainty, and reopening accelerated, inflation fears drove up interest rates resulting rotation from growth stocks to value and cyclical stocks. Monitoring these movements regularly can be challenging.

The wide variety of equity indices and related ETFs covering different cross-section and themes within the equity market can be useful. I’ve been researching a family of ETFs that can be used to dissect the US equity universe effectively. ETFs based on Russell family of indices have proved a great tool. Using Bloomberg’s ETF and related functions, I have been analyzing a select set of distinct ETFs. And I intend to present some of these findings in a multi-part blog.

Below are some useful ETFs based on Russell indices. The complete list of Russell Indices can be viewed here. Working with a single family of indices is essential for the analysis to be consistent. The ETFs resulting from slicing and dicing this single family of Russell indices will offer a consistent view of historic and emerging trends and rotations.

ETFs

Ticker

Related Russell Index

Classification by Market Capitalization

 

iShares Russell 3000 ETF

IWV US

3000

Top 3000 US Companies by Market Cap

 

iShares Russell 1000 ETF

IWB US

1000

Biggest 1000 of the 3000

 

iShares Russell Top 200 ETF

IWL US

200

Top 200 of the Russell 1000

 

iShares Russell Mid-Cap ETF

IWR US

800

Mid-cap – bottom 800 of Russell 1000

 

iShares Russell 2000 ETF

IWM US

2000

Small-cap ---- bottom 2000 of the Russell 3000

 

iShares Russell 2500 ETF

SMMD US

2500

Mid and Small Cap – Bottom 2500 of the Russell 3000

 

iShares Micro-Cap ETF

IWC US

Micro-Cap

Micro-cap represents bottom 1000 of the Russell 3000 PLUS

1000 from next level. Essentially bottom 2000 of Russell 4000

 



The chart shows the year-to-date returns [Source: Bloomberg] comparison between Small, Small-to-Mid and Large cap stocks. It shows small-caps as a clear favorite with 60.81% annualized returns compared to 44.22% for large-cap.

Next we will look at additional ETFs representing Value and Growth factors across small, mid and large cap within Russell family of indices.

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