LIVE MARKETS-Russell 2000 reconstitution cutoff nearing 2020 Covid low

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RUSSELL 2000 RECONSTITUTION CUTOFF NEARING 2020 COVID LOW

As FTSE Russell moves closer to the final reconstitution of its family of indexes at the end of June, the next milestone in its multi-step process is the April 30 "rank day" when index eligibility is determined by market cap at the close of trading.

Melissa Roberts, analyst at Stephens has reduced her estimates for the cutoff for both the small cap Russell 2000 .RUT and large cap Russell 1000 .RUI due to the recent market volatility and notes the small cap cutoff if nearing the 2020 low.

Using data through April 10, Roberts now estimates the cutoff for new additions to the indexes to be $105 million for the Russell 2000 and $4.3 billion for the Russell 1k index. The compares to the $127 million and $4.9 billion Roberts estimates on March 26.

The cutoff levels were $150 million and $4.6 billion in 2024.

For companies moving down from the large cap index to the small cap, Roberts now sees a cutoff of $1.8 billion while she expects the cutoff from those stocks moving up from the Russell 2000 to the Russell 1000 to be $7 billion, down from the prior view of $2.3 billion and $7.9 billion, respectively.

The reason for the drop below 2024 levels, according to Roberts, is that the smallest members of the Russell Microcap index .RUMIC are likely to supply the new additions to the small cap index, due to an overlap between the largest names in the microcap and small cap indexes.

As these smaller microcaps significantly underperformed "that puts significant downward pressure on the projected Russell 2000 index cutoff."

(Chuck Mikolajczak)

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