The Russell 2000 was the star of the US market in 2013, but has been a little bit of a laggard in 2014. As of Friday the Russell 2000 was down 2.99% for the year while both the NASDAQ-100 and S&P 500 are showing gains. The result is an elevated level for the CBOE Russell 2000 Volatility Index (RVX – 20.04) relative to the CBOE NASDAQ-100 Volatility Index (VXN – 17.03) or the CBOE Volatility Index (VIX – 12.91). The RVX vs. VIX spread rose to over 8 points this past week which was the first time the spread had been that wide since early 2012.
The NASDAQ-100 beat the performance of the Russell 2000 and S&P 500 gaining about 1.5%. As would be expected VXN dropped over 8% which was more than the 6.31% loss for RVX. Also, more anecdotal than quantifiable, it seems that post earnings season VXN has a little headwind as the earnings for large NDX components are in the rear view mirror.
The curves did what the curves should do with strength in the underlying equity markets – they steepened a bit and took on a bit of a contango like shape. More noticeable was the change in the VXN curve where the May future was at a slight premium to the index, but moved to a discount which again may be partially attributable to the end of earnings season for the first quarter of 2014.