Bull Market Trend Continues In 2Q’14 via Royce Funds
We believe both economic and market conditions appear sufficiently strong to keep the bullish trend going, although a correction in the near term would not surprise us. Nevertheless, conditions appear to be conducive for both a quality focus and active management, especially in the small-cap sector.
After a difficult April, small-cap companies rallied through quarter end to post their eighth consecutive quarter of positive performance (as measured by the Russell 2000 Index).
It was not enough to catch their large-cap counterparts; for the quarter the large-cap S&P 500 and Russell 1000 Indexes were up 5.2% and 5.1%, respectively, versus a gain of 2.0% for the small-cap Russell 2000.
Year-to-date through 6/30/14, the story was the same, with the S&P 500 (INDEXSP:.INX) and Russell 1000 (INDEXRUSSELL:RUI) posting gains of 7.1% and 7.3%, respectively, versus 3.2% for the small-cap index.
Within both Russell indexes, Energy and Utilities were the top performing sectors for the year-to-date period ended 6/30/14.
Both the S&P 500 and Russell 1000 made new highs during the quarter. In addition, both large-cap indexes provided a performance advantage versus the Russell 2000 over the trailing one- and three-year periods ended 6/30/14.
In contrast, the Russell 2000 outpaced both large-cap indexes for the trailing five-, 10-, and 15-year periods ended 6/30/14.
From the 10-year Treasury low on 5/2/13 through 6/30/14, equities of all sizes performed well, with the Russell 2000 (INDEXRUSSELL:RUT) up 28.9%, the S&P 500 up 25.8%, and the Russell 1000 up 26.5%.
Non-U.S. equities enjoyed similar success—for the second quarter, the Russell Global ex-U.S. Small Cap Index was up 4.2% versus 5.0% for the Russell Global ex-U.S. Large Cap Index. Year-to-date, non-U.S. small-caps had the edge, with the Russell Global ex-U.S. Small Cap Index returning 7.5% versus a gain of 5.8% for the Russell Global ex-U.S. Large Cap Index.
Within small-cap, value continued its 2014 advantage. For the quarter, the Russell 2000 Value Index was up 2.4% versus a gain of 1.7% for the Russell 2000 Growth Index. Year-to-date through 6/30/14, the small-cap value index returned 4.2% while the small-cap growth index rose 2.2%.
Mid-cap continued its impressive 2014 performance. The Russell Midcap Index was up 5.0% in the quarter and 8.7% on a year-to-date basis. In contrast, micro-caps struggled, with the Russell Microcap Index down 1.4% for the quarter and up only 1.6% for the first six months.
