Indrani De
Catherine Yoshimoto
- The Russell US indexes were designed to capture the whole US economy, as reflected in its companies’ share prices, and have been doing so since 1984.
- The Russell index approach is based on publicly available data and a logical, inclusive methodology, which accounts for the changes in industry weights and stock rankings over time.
- The Russell index rules are responsive to the demands of professional investors, such as excluding stocks with low voting rights or low share prices.
The Russell US indexes have always taken a consistent and transparent approach to measuring a volatile and unpredictable market.
From the outset, the Russell 3000 index (and its sub-indexes, the Russell 1000 and Russell 2000) were designed to capture the whole US economy, as reflected in its companies’ share prices.
That was why the indexes were introduced in 1984: existing benchmarks were either incomplete or had gaps or overlaps between them.
The Russell index approach is based on publicly available data and a logical, inclusive methodology, which is why many professional investors favour this family of benchmarks in their day-to-day jobs.
Swings in sentiment
But if the ground rules of the Russell indexes are consistent, the underlying US equity market is prone to big swings in sentiment. Industries come in and out of favour, while individual stocks constantly replace each other on the leaderboard.
Take the industry weights in the Russell 3000 since the index was launched in 1984: we’ve seen the recent rise to dominance of the technology industry, but the top industry of twenty years ago (financials) has now receded in importance (although part of that decline is down to the creation of a separate sector for real estate).
Over four decades, the consumer discretionary and energy industries have also become less prominent, while industrials and health care have gained a larger share of the index.
Industry weights in Russell 3000
Source: FTSE Russell. In 1983, 1993, and 2003, Telecommunications were included with Utilities, and Real Estate was included with Financials.
Stock leaderboard
These changes in fortune are even more pronounced in a snapshot of the top ten stocks in the Russell 3000 at decade intervals since the index’s launch.
Only three of the top ten stocks at the index’s launch were on the leaderboard a decade later, and none are there now.
Only two stocks (General Electric and Exxon—later Exxon Mobil) were in the top ten across four columns of the table, but neither is there today. In fact, General Electric no longer exists in its historic form as a large industrial conglomerate (it was broken up in 2021).
Top ten stocks in Russell 3000 at decade intervals
| 01/01/1984 | 01/01/1994 | 01/01/2004 | 01/01/2014 | 08/11/2023 |
|---|---|---|---|---|
| IBM | GENERAL ELECTRIC | GENERAL ELECTRIC | APPLE | APPLE |
| EXXON CORP | EXXON CORP | PFIZER | EXXON MOBIL | MICROSOFT |
| GENERAL ELECTRIC | AT&T | EXXON MOBIL | MICROSOFT | AMAZON |
| GENERAL MOTORS | COCA-COLA | CITIGROUP | NVIDIA | |
| AT&T | PHILIP MORRIS | MICROSOFT | GENERAL ELECTRIC | ALPHABET CLASS A |
| STANDARD OIL | MERCK | INTEL | JOHNSON & JOHNSON | META PLATFORMS |
| SCHLUMBERGER | GENERAL MOTORS | CISCO SYSTEMS | CHEVRON | ALPHABET CLASS C |
| SEARS, ROEBUCK | PROCTER & GAMBLE | JOHNSON & JOHNSON | PROCTER & GAMBLE | BERKSHIRE HATHAWAY |
| EASTMAN KODAK | WAL-MART | AIG | JPMORGAN CHASE | TESLA |
| DU PONT | GTE CORP | IBM | WELLS FARGO | ELI LILLY |
Source: FTSE Russell.
Consistency and staying the course
Despite all these changes, the Russell 3000 total return index has reflected a very handsome return over its four decades: it rose more than 6,100 percent between 3 January 1984 and 8 November 2023.
It’s reassuring for professional index users to know that the principles underlying the index are steady and built to meet their demands.
For example, following a FTSE Russell client consultation conducted in 2017, we exclude stocks that offer less than 5 percent of voting rights from our indexes (a policy that kept Snap Inc., a 2017 New York Stock Exchange initial public offering, out of the Russell 3000).
And we don’t allow stocks with a sub-$1 share price into the Russell indexes either (something that kept WeWork out at the June 2023 index reconstitution—the company filed for Chapter 11 bankruptcy five months later).
Financial markets are far from constant. But the way we measure them needs to be consistent.
Disclaimer
© 2024 London Stock Exchange Group plc and its applicable group undertakings (“LSEG”). LSEG includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global Debt Capital Markets Limited (together, “FTSE Canada”), (4) FTSE Fixed Income Europe Limited (“FTSE FI Europe”), (5) FTSE Fixed Income LLC (“FTSE FI”), (6) FTSE (Beijing) Consulting Limited (“WOFE”) (7) Refinitiv Benchmark Services (UK) Limited (“RBSL”), (8) Refinitiv Limited (“RL”) and (9) Beyond Ratings S.A.S. (“BR”). All rights reserved.
FTSE Russell® is a trading name of FTSE, Russell, FTSE Canada, FTSE FI, FTSE FI Europe, WOFE, RBSL, RL, and BR. “FTSE®”, “Russell®”, “FTSE Russell®”, “FTSE4Good®”, “ICB®”, “Refinitiv” , “Beyond Ratings®”, “WMR™” , “FR™” and all other trademarks and service marks used herein (whether registered or unregistered) are trademarks and/or service marks owned or licensed by the applicable member of LSEG or their respective licensors and are owned, or used under licence, by FTSE, Russell, FTSE Canada, FTSE FI, FTSE FI Europe, WOFE, RBSL, RL or BR. FTSE International Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator. Refinitiv Benchmark Services (UK) Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator.
All information is provided for information purposes only. All information and data contained in this publication is obtained by LSEG, from sources believed by it to be accurate and reliable. Because of the possibility of human and mechanical inaccuracy as well as other factors, however, such information and data is provided "as is" without warranty of any kind. No member of LSEG nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the accuracy, timeliness, completeness, merchantability of any information or LSEG Products, or of results to be obtained from the use of LSEG products, including but not limited to indices, rates, data and analytics, or the fitness or suitability of the LSEG products for any particular purpose to which they might be put. The user of the information assumes the entire risk of any use it may make or permit to be made of the information.
No responsibility or liability can be accepted by any member of LSEG nor their respective directors, officers, employees, partners or licensors for (a) any loss or damage in whole or in part caused by, resulting from, or relating to any inaccuracy (negligent or otherwise) or other circumstance involved in procuring, collecting, compiling, interpreting, analysing, editing, transcribing, transmitting, communicating or delivering any such information or data or from use of this document or links to this document or (b) any direct, indirect, special, consequential or incidental damages whatsoever, even if any member of LSEG is advised in advance of the possibility of such damages, resulting from the use of, or inability to use, such information.
No member of LSEG nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this document should be taken as constituting financial or investment advice. No member of LSEG nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset or whether such investment creates any legal or compliance risks for the investor. A decision to invest in any such asset should not be made in reliance on any information herein. Indices and rates cannot be invested in directly. Inclusion of an asset in an index or rate is not a recommendation to buy, sell or hold that asset nor confirmation that any particular investor may lawfully buy, sell or hold the asset or an index or rate containing the asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.
Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index and/or rate returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index or rate inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index or rate was officially launched. However, back-tested data may reflect the application of the index or rate methodology with the benefit of hindsight, and the historic calculations of an index or rate may change from month to month based on revisions to the underlying economic data used in the calculation of the index or rate.
This document may contain forward-looking assessments. These are based upon a number of assumptions concerning future conditions that ultimately may prove to be inaccurate. Such forward-looking assessments are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially. No member of LSEG nor their licensors assume any duty to and do not undertake to update forward-looking assessments.
No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of LSEG. Use and distribution of LSEG data requires a licence from LSEG and/or its licensors.
