Tracking the Russell Reshuffle
A Free Post on the $200+ Billion Trading Event Coming June 27th
Disclaimer: I own shares of some of the mentioned companies and stand to benefit if they rise in price. I may decide to purchase or sell shares at any time without prior notice. Do your own research and size positions appropriately if you invest. Nothing here is meant to be understood as investment or financial advice. I use AI tools to help me in my research, writing, and editing processes.
Introduction
Mark your calendar: June 27th.
That's when the Russell index family rebalances, triggering over $200 billion in trading volume and potentially dramatic moves in hundreds of individual stocks. If you own small-cap or mid-cap stocks, this event (and the current period leading into it) could significantly impact your portfolio, for better or worse.
The preliminary lists are already out, but they can change until June 20th. Here's what you need to know and which companies I'm watching.
Outline
Introduction
Outline
The Index Effect
The Russell Reconstitution
My Selection of Interesting Companies
Reconstitution Day Trading Patterns
Spot Check: How Did 2024 Inclusions Do
Your Turn
The Index Effect
I would like to draw your attention to an upcoming regular event that can serve as a share price catalyst - for better or worse: inclusions into or exclusion from stock indices, i.e. the Index Effect. I think the impact and magnitude of the effect on individual securities are impossible to predict exactly, but it is good to be aware.
The Russell reconstitution typically results in one of the highest trading volume days of the year. The firm said a record of nearly $220 billion was traded across U.S. exchanges when the 2024 reconstitution took effect.
Source: Investment Executive, accessed May 31, 2025.
In my understanding, the Index Effect is caused by fund flows from passive vehicles as well as institutions considering index participation as a criterion for candidate investments. Savvy market participants may attempt to position before the event. I bring that up because in a recent presentation,
cited research (at minute 17:00) that estimated $1 of flows into the market (via a passive investment vehicle) might cause up to $8 of market capitalization increase. He also repeated this effect size in this podcast transcript. I conjecture that it would also hold in reverse because the passive vehicles are insensitive to prices.Russell-tracking funds must rotate their holdings during reconstitution, creating pronounced effects on both dropped and included securities as price-insensitive dollars flow out of and into these stocks. And all dollars of the passive vehicles need to find a “home”. If you are interested in the nuances of the index effect, you can see my prior article on the topic:
The bottom line of that article is that genuine (for lack of a better word) inclusions in or exclusions from indices have a noticeable effect on stocks. Index promotions and demotions are more nuanced, sometimes counterintuitive.
Also contextually related is my article about Passive Investing and the rebalancing actions. However, for the upcoming reconstitution event, Perplexity.AI was adamant that most trading happens in the final hours before the market closes on the reconstitution day itself (see linked PDF below). Thus, the following article is less relevant, but potentially interesting, too:
The Russell Reconstitution
Timeline
Last week, several companies I am interested in announced index inclusions for the June 30 rebalancing of the Russell index family. As some of these would be “genuine inclusions”, I believe the inclusion may tend to be a positive (on balance) for each of the following companies. You may have noticed that I wrote “would be” - the list of index changes will potentially change up until the event:
📅 Russell Reconstitution Timeline - June 2025
* May 30 - First preliminary list update
* June 6 - Second preliminary list update
* June 13 - Third preliminary list update
* June 20 - Final preliminary list update
* June 27 - Reconstitution takes effect after the US market closes ⚡
* June 30 - New index composition fully implemented
Key Point: Preliminary lists can change up until June 20. The final trading impact typically occurs on June 27, often generating $200+ billion in trading volume.For reference, the current lists of inclusions and exclusions are accessible on the linked website. As an aside, they will double the frequency of reconstitution starting next year1:
FTSE Russell has announced the reconstitution of the Russell US Indexes will change from an annual to a semi-annual schedule in 2026. Find out more information.
Source: FTSE, accessed May 31, 2025.
The Preliminary Index Additions & Deletions
Russell 3000 as of May 30, 2025: additions / deletions
Russell Microcap as of May 30, 2025: additions / deletions
The Mechanics
According to this document on the FTSE reconstitution website, the main points of the process are
FTSE creates a list of eligible companies (country determination, minimum share of voting rights in public float, some rules re IPOs and SPACs), and determines the market captialization for each. The 4,000 largest make up the so-called Russell 3000E and it serves as the basis.
Oddly, the market capitalization depends on the April 30 closing price (times shares outstanding). I would have expected a more robust metric like e.g. the VWAP.
Only “Common stock, non-restricted exchangeable shares and partnership units/membership interests” are considered.
The Russell 3000 consists of the top 3,000 Russell 3000E companies. The Russell Microcap consists of the bottom 2,000 of the Russell 3000E. Thus, there is an overlap of Russell 3000E companies 2,001-3,000 in 3000 and Microcap.
Source: Russell US Equity Indices Ground Rules, v6.6. Accessed June 2, 2025. Interesting contingency handling for almost all indices: “After the initial market capitalisation breakpoints are determined by the ranges listed above, new members are assigned based on the breakpoints and existing members are reviewed to determine if they fall within a cumulative 5% market cap range around these new market capitalisation breakpoints. If an existing member’s market cap falls within this cumulative 5% of the market capitalisation breakpoint, it will remain in its current index rather than be moved to a different market capitalisation-based Russell index”
For last year’s reconstitution, I find the following size overview interesting. Clearly, this year’s cutoffs will be different.
Source: Russell US Indexes Ecosystem, FTSE Russel, accessed June 2, 2025.
My Selection of Interesting Companies
Russell 3000
Inclusion candidates that I own or am interested in:
Ascent Industries (I own, no write-up, yet)
Garrett Motion (I own)
Idaho Strategic Resources (I own, no write-up, yet)
Sanuwave Health (I own, no write-up, yet)
Deletion candidates that I find noteworthy:
Cardlytics (I sold)
Russell Microcap
Inclusion candidates that I own or am interested in:
Mind Technologies (I own, no write-up, yet)
RAVE Restaurant Group (I own)
“The SaaS Gem” (I own)
Deletion candidates that I find noteworthy:
Creative Realitites (mentioned below)
Reconstitution Day Trading Patterns
I checked the mechanics around reconstitution day trading with Perplexity.Ai. You can find the results below. Essentially:
The vast majority of trading volume occurs on this single day, often during the final minutes of market close.
Academic research found no run-up in trading activity for index-switching stocks before reconstitution day
Trading volume returns to baseline levels immediately after the reconstitution day.
While elevated trading is concentrated on reconstitution day, some traders exploit a 6-day window around the event. (I assume it is so limited because the final preliminary lists only get published on June 20)
While there are different index tracking and rebalancing strategies for ETFs, apparently, most ETFs must balance on reconstitution day to avoid excessive tracking error.
Focus on the final 30 minutes of trading on reconstitution Friday, not the following Monday.
While it makes intuitive sense that trading volume is time-bound closely around reconstitution day, the key question is, of course: will prices stay elevated / depressed afterwards, or do they quickly return to around before reconstitution?
Spot Check: How Did 2024 Inclusions Do
To form anecdotal evidence about potential effect sizes of the event, if any, I performed a quick search for companies that were included in the Russell Microcap Index on June 28th, 2024, with the first preliminary lists published on May 24th, 2024. From a quick Google search, I selected three companies:
Creative Realities, Inc. (CREX)
Source: Yahoo Finance. CREX announced its PR on June 4th. On a high level, the share price increased to higher levels during the month of preparing for the reconstitution. The July levels are higher than those of April, and the June levels are higher than those of May.
Two days later, the trading volume and share price increased notably.
The volume faded towards reconstitution day. Share price retreated and then jumped again on lower volume towards reconstitution day.
Overall, it seems the share price only reacted once the company announced the news. That is surprisingly inefficient, considering that the first lists were already published before. Also, consider that the Russell process is well described and could have been implemented by virtually anyone on April 30th to front-run even the publication of the first list.
Note that the company did report Q1’24 results on May 10th, 2024. Hence, the early May price appreciation and trading volumes were potentially caused by trading around the earnings release instead of the reconstitution.
Fluent, Inc. (FLNT)
Source: Yahoo Finance. FLNT announced its PR on June 28th, i.e. reconstitution day, referencing the list of June 21, 2024. On a high level, the share price increased and fell twice during May. June itself is unremarkable if not disappointing compared to May. However, the July levels are higher than the April levels.
Volume was high in May and faded over the two months to July, when the reconsituted index is in effect.
Overall, the share price moved only 10% on reconstitution day, but it had significant movements in the months prior to the event. The company had announced Q1’24 results on May 15th, but it appears that most trading volume was even before that.
On May 24th, when the first Russell reconstitution lists were announced, there was a noticeable share price appreciation.
electroCore, Inc. (ECOR)
Source: Yahoo Finance. ECOR announced its PR on June 11th, 2024, without referencing a particular list (the last publication date prior to the PR was June 7th). On a high level, the share price increased in early May and then retraced until reconstitution day. Comparing the July share price levels to April’s, it is hard to spot a discernable difference.
Volume was high in early May and faded over the two months to July, with a brief spike in mid-June.
The company had announced Q1’24 results on May 8th, which I suspect is the cause of the early May price and volume. In early June, the company announced a $9.3M financing with little effect on the chart, it seems. Reconstitution day was unremarkable but volatile (judging from the intraday high).
On May 24th, when the first Russell reconstitution lists were announced, there was no noticeable share price appreciation.
Where does that leave us?
There is no distinct effect on the reconstitution day itself. For two of the three case studies, there was a share price appreciation between April and July, but the timing varied.
I speculate, but maybe the companies’ fundamentals announced during the period also played a role. From a superficial analysis, it appears that all companies lost money in their respective reported quarters, but CREX and FLNT were Adjusted EBITDA profitable. ECOR, which has the odd-one-out chart without the April-July pattern around reconstitution, was the only company that was even loss-making on that metric.
Chances are, there is an effect, but it is not clear-cut. Enter at your own peril.
Conclusion
The Russell reconstitution is one of those market events that's simultaneously predictable and unpredictable. We know it's coming June 27th, we know it will generate massive trading volume, and we know certain stocks will be affected. What we can't know is exactly when, by how much, in which direction, or for how long.
The opportunity is real - genuine index inclusions tend to create lasting demand for stocks as passive funds must buy and hold them. Two out of three stocks that were included in the Microcap index last year had higher price levels in July than they had in April.
Timing is everything - my analysis shows the biggest moves for Microcap Index inclusions in terms of price and volume often occur before the reconstitution day itself. That creates an information advantage for attentive investors and roughly aligns with a mildly efficient market.
The effect varies widely - don't expect every inclusion to be a home run. Company fundamentals, timing of earnings releases, and other factors can overshadow the index effect. My (very preliminary, at best) analysis indicates that at least Adjusted EBITDA profitability is required to see an effect.
To me, the prudent approach is not trying to time every move, but being aware when your stocks might be in play. Check if your small and mid-cap holdings appear on the preliminary lists. Set alerts for the key dates. And remember that the current period presents both opportunity and risk. For the upcoming June 27th reconstitution, I'm watching my positions closely. The preliminary lists give us a schedule, but the final chapter won't be written until after market close on that Friday.
Whether you're a passive observer or active participant, June 27th is worth having on your radar.
Your Turn
Are you watching the Russell reconstitution at all? What are you watching? Have you seen the index effect play out in your portfolio before? Share your thoughts in the comments, and don't forget to subscribe.
I am not sure what “including a parallel run in November 2025“ on the linked page is supposed to mean. I assume they will make a trial run, but not implement it.