Growth to get more focus in annual Russell rejig - UBS
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GROWTH TO GET MORE FOCUS IN ANNUAL RUSSELL REJIG - UBS
Markets are bracing for the much awaited annual rejig of the FTSE Russell index and analysts anticipate that the largest growth firms will garner more shine in comparison with their value peers.
Reconstitution day this year is after markets close on June 28 and is aimed at ensuring the index reflects the current state of the U.S. stock market.
Many of the themes that have dominated market sentiment since 2023 have been around the positive prospects of artificial intelligence on corporate performance and expectations around the outlook for interest rate cuts by the Federal Reserve.
This year, analysts at UBS expect the concentration of the biggest 10 firms in the Russell 1000 growth index .RLG to increase by around 5.2% to 61.3%, with the weight of megacaps such as Microsoft MSFT.O, Apple AAPL.O and Nvidia rising nearly 1% each.
The weight of top value firms on the other hand, is anticipated to be reduced by 1.7% to 16.1%.
"In contrast to growth, the reconstitution should decrease the concentration in the largest value stocks. This should result in modest selling pressure in the largest companies," said a team of analysts led by Patrick Palfrey, strategist at UBS.
The concentration of stocks such as Berkshire Hathaway B BRKb.N, JPMorgan Chase JPM.N and Exxon Mobil XOM.N in the Russell 1000 value index .RLV, is expected to drop around 0.3%-0.2% each at the end of the rebalancing.
The large caps Russell 1000 growth index .RLG has jumped nearly 14% so far into the year, against the Russell 1000 value index's .RLV 7.8% rise, while the benchmark S&P 500 .SPX has climbed over 11% during the same period.
Reconstitution days are often very volatile and past sessions have often seen the highest trade volumes for the year.
(Johann M Cherian)
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