Now that the dust has settled on the annual Russell rebalance, let’s take a closer look at the shiny new indexes and see what they say about the market.

The total-market Russell 3000 Index has seen some sizable changes in its sector weightings, although the top 10 remain very much the same. Figure 1 shows the new 2009 sector weightings according to the Russell sector classification system. Not surprisingly, financial services is no longer the largest sector: It now takes second place to technology, which is weighted at 16.19% versus financials at 15.27%. In 2008, those sectors were reversed, with financials at 17.24% and tech at 14.19%.

 

Figure 1: Russell 3000 Sector Weights In 2009 & 2008

Sector

2009

2008

Technology

16.19%

14.19%

Financial Services

15.27%

...

Highlights include American International Group, Inc. (AIG), Citigroup, Inc. (C), JPMorgan Chase & Co. (JPM), Wells Fargo & Co. (WFC) and Bank of America Corp. (BAC).This morning, Fed Chairman Ben Bernanke gave a speech on the topic of financial regulation and the lessons learned from the recent disaster. Here is a key section of the speech, with my thoughts interspersed: 

"Looking forward, I believe a more macroprudential approach to supervision--one that supplements the supervision of individual institutions to address risks to the financial system as a whole--could help to enhance overall financial stability. Our regulatory system must include the capacity to monitor, assess, and, if necessary, address potential systemic risks within the financial system. Elements of a macroprudential agenda include:   

"monitoring large or rapidly increasing exposures--such as to subprime mortgages--across firms and markets, rather than only at the level of individual firms ...