{"id":91852,"date":"2016-06-23T08:46:22","date_gmt":"2016-06-23T12:46:22","guid":{"rendered":"http:\/\/countingpips.com\/?p=91852"},"modified":"2016-06-23T07:46:45","modified_gmt":"2016-06-23T11:46:45","slug":"russell-2000-set-for-historic-rebalancing-day","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/06\/russell-2000-set-for-historic-rebalancing-day\/","title":{"rendered":"Russell 2000 Set for Historic Rebalancing Day"},"content":{"rendered":"<div id=\"inves-3441544141\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">June 23, 2016<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><p>By <a href=\"http:\/\/WallStreetDaily.com\/\"><u>WallStreetDaily.com<\/u><\/a> <img loading=\"lazy\" decoding=\"async\" class=\"attachment-home-th size-home-th wp-post-image\" style=\"display: block; margin-bottom: 5px; clear: both;\" src=\"http:\/\/www.wallstreetdaily.com\/wp-content\/uploads\/2016\/06\/06-23-russell-indices-rebalancing.jpg\" sizes=\"auto, (max-width: 510px) 100vw, 510px\" srcset=\"http:\/\/www.wallstreetdaily.com\/wp-content\/uploads\/2016\/06\/06-23-russell-indices-rebalancing-300x176.jpg 300w, http:\/\/www.wallstreetdaily.com\/wp-content\/uploads\/2016\/06\/06-23-russell-indices-rebalancing.jpg 510w\" alt=\"Russell 2000 Set for Historic Rebalancing Day\" width=\"510\" height=\"300\" \/><\/p>\n<p>Mention the word \u201crebalance,\u201d and most investors think of the boring annual process of buying and selling in order to reset the weight of each asset class in their <a href=\"http:\/\/www.wallstreetdaily.com\/2015\/12\/11\/protect-portfolio-inflation-deflation\/\">portfolios<\/a>.<\/p>\n<p>It\u2019s a chore, yes. But it\u2019s a simple, proven way to maximize returns, while minimizing risk.<\/p>\n<p>But today, I want to cover a lesser-known rebalancing event \u2013 but one that promises to be the busiest trading day of this year \u2013 and perhaps ever.<\/p>\n<p>I\u2019m talking about the annual rebalancing of the small-cap Russell 2000 Index.<\/p>\n<p>Here\u2019s what you need to know \u2013 and why this year\u2019s rebalance could be historic\u2026<\/p><div id=\"inves-3530459917\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<h2>The Russell Rebalance Is Underway<\/h2>\n<p>Once every year, FTSE Russell recalibrates the widely followed Russell indices to keep them in sync with the broader market.<\/p>\n<p>According to Convergex, there\u2019s approximately $850 billion in funds tied directly to tracking the Russell 1000 and 2000 indices. That means every time the indices change, a substantial portion of this money needs to be re-allocated.<\/p>\n<p>Doing so ensures that funds\u2019 portfolios match up with any stocks that are being added or removed from the indices they\u2019re designed to track.<\/p>\n<p>This year, Convergex estimates there will be nearly $50 billion in turnover caused by the reconstitution of the Russell indices, involving 398 stocks.<\/p>\n<p>Understandably, this flood of buying and selling materially impacts share prices. In short\u2026<\/p>\n<ul>\n<li>If you own stocks being added to the Russell 2000, you can expect to enjoy a one-month double-digit boost to share prices of about 11%, on average.<\/li>\n<\/ul>\n<ul>\n<li>If you own any being deleted, a decline of 2% (on average) is headed your way.<\/li>\n<\/ul>\n<p>And remember, those are the only averages. Individual stocks can move much higher (or lower).<\/p>\n<p>The reason I\u2019m bringing all this up today is because the process is about to be completed.<\/p>\n<h2>D-Day Is Tomorrow<\/h2>\n<p>Unlike many cushy private clubs, each company has to qualify every year to be included in the Russell indices.<\/p>\n<p>On May 27, Russell officially ranked every U.S. public company based primarily on market cap. (Trading liquidity and available float are also taken into consideration.)<\/p>\n<p>Last year, the cutoff was around a market cap of $175 million. This year\u2019s cutoff was lower \u2013 $133 billion \u2013 given the decline in stock prices over the last 12 months.<\/p>\n<p>On June 10 and 17, preliminary lists of companies being added and deleted were released.<\/p>\n<p>But the final list will be released tomorrow (June 24), with the changes set in stone after the market closes that day.<\/p>\n<p><u>This will be a very big day for small-cap stocks<\/u>.<\/p>\n<p>Possibly bigger than any other rebalancing day on record.<\/p>\n<h2>\u201cBrexit\u201d Amps Up the Volatility<\/h2>\n<p>During a typical Russell rebalance, trading volumes reach a crescendo at the end of the day \u2013 typically the last five minutes, as funds rush to match their portfolios with end-of-day prices for stocks that are joining or leaving the index.<\/p>\n<p>Now, in case you\u2019ve lived under a rock for the past few months, you\u2019ll know that this year\u2019s flood of buying and selling will also occur on the day <em>after<\/em> the United Kingdom votes on whether to leave the European Union \u2013 the so-called Brexit.<\/p>\n<p>While the British public is voting today, the results won\u2019t be reported until after the closing bell.<\/p>\n<p>Since the results hold profound implications for the global markets, Friday morning promises to be a potentially volatile trading day in its own right.<\/p>\n<p>Factor in the Russell rebalance, and we could be in store for one of the busiest small-cap trading days ever.<\/p>\n<p>This is an instance when <u>short-term price action will have absolutely nothing to do with companies\u2019 underlying fundamentals<\/u>.<\/p>\n<p>So if you own or are looking to buy any small-cap stocks in the next two days, you absolutely need to be aware of the companies set to be added or deleted from the Russell 2000 \u2013 and even those on the bubble \u2013 because the changes will directly impact share prices.<\/p>\n<p>You can find the preliminary list of additions and deletions <a href=\"https:\/\/www.ftserussell.com\/research-insights\/russell-reconstitution\" target=\"_blank\">here<\/a>.<\/p>\n<p>Ahead of the tape,<\/p>\n<p>Louis Basenese<\/p>\n<p>The post <a href=\"http:\/\/www.wallstreetdaily.com\/2016\/06\/23\/russell-indices-rebalancing\/\" rel=\"nofollow\">Russell 2000 Set for Historic Rebalancing Day<\/a> appeared first on <a href=\"http:\/\/www.wallstreetdaily.com\" rel=\"nofollow\">Wall Street Daily<\/a>.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By WallStreetDaily.com Mention the word \u201crebalance,\u201d and most investors think of the boring annual process of buying and selling in order to reset the weight of each asset class in their portfolios. It\u2019s a chore, yes. But it\u2019s a simple, proven way to maximize returns, while minimizing risk. But today, I want to cover a [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-91852","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/91852","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=91852"}],"version-history":[{"count":3,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/91852\/revisions"}],"predecessor-version":[{"id":91875,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/91852\/revisions\/91875"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=91852"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=91852"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=91852"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}