Another look at that Russell surge

Earlier, we saw that the Russell has almost doubled. We got a few questions about how that impacted the S&P. The answer? Not much, but over the next 2-3 months, its returns were pretty subdued, with a poor risk/reward ratio.

If we use a proxy index prior to the inception of the Russell 2000, we can see just how different it performed after almost doubling from a low. Prior to the last 40 years, it was an almost universally positive signal. The dates for some of them are slightly different because this is a proxy index and not an "official" one like the Russell.

That was an even better sign for the S&P.

We tend to put more weight on recent history, so would still give an edge to the idea that a doubling of the Russell in record time is probably a short- to medium-term negative as gains get digested.