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Large caps, growth stocks dominate year-end returns for 2007
Russell Global Large Cap Index also outperforms for the year
January 3, 2008 — Investors warmed up to growth stocks in 2007 as the broad-market Russell 3000® Growth Index for the first time since 1999 outperformed the Russell 3000® Value Index. The growth index reflected an 11.4% return for 2007, while the value Index dipped 1% for the year.
In addition, growth stocks outperformed value stocks for 2007 at every capitalization tier by a double-digit spread. The gap favoring growth in the large-cap segment, for example, was 12 percentage points for the year—a complete reversal from 2006.
"This resurgence of growth was long overdue, particularly in the small-cap arena, as we witnessed some mean reversion after seven years of value style leadership," said Chris Tessin, portfolio manager. "Part of growth's win for 2007 was simply the relatively poor performance of financial services stocks, which represent a large percentage of each value index."
Another reversal in 2007 involved the resurgence of large-cap stocks. The large-cap Russell 1000® Index reflected a 5.8% gain for the year, outpacing the small-cap Russell 2000® Index (-1.6%).
"Some sectors in particular did their part to drive the Russell 1000 in 2007, particularly energy (43%), integrated oils (29.8%) and technology (16.9)," said Tessin. "This strength helped overcome the 16.2% loss for financial services in 2007, including a 12.6% decline for the fourth quarter."
He added that active managers generally benefited in 2007 performance from being underweight financials and capturing the broader themes that drove the market, such as the outperformance of energy stocks.
U.S. equity returns for 2007 also show the best-performing benchmark was the Russell Top 200® Growth Index (12.2%), which also led all other U.S. market segments for the fourth quarter. In contrast, the smallest value stocks, as reflected by the Russell Microcap® Value Index (-13.1%), turned in the worst performance for 2007.
"Mega-cap growth stocks led the market in 2007, while at the opposite end of the style and capitalization spectrum micro-cap value stocks lagged everything," said Tessin. "Given the credit crunch, a declining dollar and some bearish macro signs, investors benefited from positioning in larger companies with international sources of revenue and greater growth prospects."
Looking at the global picture, the Russell Global Index (12.1%), which includes the Russell Developed Index (9.1%) and Russell Emerging Markets Index (40.9%), reflected a relatively strong year for markets globally. The Russell Global ex-US Index turned in a 17.7% gain for the year, while the Russell 3000 (the U.S. component for the global index) gained 5.1%.
Russell 1000 Index:
Sector returns through Dec. 31 |
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4Q07 |
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2007 |
| Technology |
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-0.6% |
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16.9% |
| Health Care |
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-0.4% |
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7.5% |
| Consumer Discretionary & Services |
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-5.0% |
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-2.6% |
| Consumer Staples |
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2.3% |
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13.8% |
| Integrated Oils |
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3.7% |
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-29.8% |
| Other Energy |
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6.5% |
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43.1% |
| Materials & Processing |
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2.4% |
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28.5% |
| Producer Durables |
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-3.1% |
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13.4% |
| Autos & Transportation |
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-7.1% |
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0.02% |
| Financial Services |
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-12.6% |
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-16.2% |
| Utilities |
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-1.5% |
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9.4% |
For additional performance figures on Russell's indexes and the user-friendly Russell index returns calculator, please visit: www.russell.com/Indexes.
About Russell: Russell Investments provides strategic advice, world-class implementation, state-of-the-art performance benchmarks and a range of institutional-quality investment products. Russell has more than $231 billion in assets under management as of Sept. 30, 2007, and serves individual, institutional and advisor clients in more than 40 countries. Russell's industry-leading indexes have $4.4 trillion in assets benchmarked to them. Founded in 1936, Russell is a subsidiary of The Northwestern Mutual Life Insurance Company.
Contacts:
Steve Claiborne, 253-439-1858
RC#4881
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Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company.
Indexes are unmanaged and cannot by invested in directly. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment.
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