By: Mark Barnes, PhD, and Christine Haggerty, Global Investment Research (Americas), FTSE Russell
Global stock markets have been hit hard this year, but few as severely as the US. With its outsized exposure to the world’s largest technology companies, the US has taken the brunt of the crushing selloff in high-growth stocks amid the investor flight from pricier, riskier segments of the market.
The broad US market, represented below by the FTSE USA index, fell 9% in April, marking one of its worst monthly performances of the past decade and nearly four times the percentage loss of the FTSE All-World ex US index for the month. The US now ranks at the bottom of the global performance scoreboard for the year so far.
FTSE index returns – 1M and YTD through April 30, 2022 (TR, LC)
Source: FTSE Russell. Data as of April 30, 2022. Past performance is no guarantee to future results. Please see the end for important disclosures.
The US losing streak has come amid a global rate-hiking cycle, the Russia-Ukraine war and the slowdown in China growth, which have stoked global recession fears and extreme market volatility. This backdrop, and the resulting spike in interest rates, has proved particularly lethal for long-popular technology and consumer discretionary stocks , which together make up 43% of the US index vs 14% for the rest of the world. Globally, these two stocks groups plunged 11.7% and 9.9%, respectively, in April, and were down 21.2% and 18.5% for the first four months.
The US market’s smaller exposure to last month’s top performers – i.e., consumer staples (the only group to post a gain across markets) and energy (essentially flat globally) – also hurt.
Russell 1000 holds its edge in April
The pain encompassed both large and small US stocks, with the Russell 1000 and Russell 2000 posting percentage declines in the mid-teens YTD. However, as the time-series chart below illustrates, the downdraft has been far steeper for the small-cap index than its large-cap counterpart. While the Russell 1000 is down 2.1% for the 12-month period, it has notched a nearly 15-percentage-point lead on the Russell 2000 for that longer time span.
Russell 1000 vs Russell 2000 Index returns (TR, rebased)
Source: FTSE Russell. Data as of April 30, 2022. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
Bias to large-caps remains in play
As has been the case for most of this year, investors continued to show a clear preference for the largest players within the best-performing industries in April, notably those benefiting from soaring commodity prices (energy and basic materials stocks) and less cyclically sensitive, stable-growth companies (consumer staples, telecom and utilities). Notably, the Russell 1000 also outperformed the small-cap index in industries that suffered the biggest declines in April, most notably in technology, consumer discretionary and industrials.
One-month industry returns (TR, %) – April 2022
Source: FTSE Russell. Based on Industry Classification Benchmark (ICB) data as of April 30, 2022. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
Diving into YTD sector-weighted returns, we find that outperforming sectors within consumer staples (e.g., tobacco and beverages), basic materials (e.g., industrial metals & mining) – as well as smaller losses in financials (i.e., banks) – were the main sources of the Russell 1000 leadership versus the Russell 2000 for the year so far.
Smaller gains in oil & gas and bigger losses in technology software and hardware were far from the biggest drags on Russell 1000 relative returns YTD.
Top/bottom 10 contributors to returns (TR, %) – YTD through April 30, 2022
Source: FTSE Russell. Based on Industry Classification Benchmark (ICB) data as of April 30, 2022. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
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This post first appeared on May 10th, 2022 on the FTSE Russell Blog
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