Russell 2000

Tracks 2,000 small-cap US companies. A key gauge of domestically focused, smaller businesses — more sensitive to US economic conditions than large-cap indices.

The Russell 2000 is the benchmark for US small-cap equities and a key gauge of domestic economic health. Small-cap companies are more domestically focused than the multinationals dominating large-cap indices — they generate more of their revenue in the US, borrow at floating rates, and are more sensitive to consumer confidence and credit availability.

As a result, the Russell tends to lead at the start of economic recoveries (small firms benefit disproportionately from looser credit) but also falls harder in downturns. The annual June reconstitution is one of the most watched events in US equity markets: known additions and deletions create predictable rebalancing flows, and hedge funds often trade against them aggressively in the weeks prior.