Like most of the major benchmarks, the Russell 2000 Index has failed to finish the year in positive territory. Though moderate gains registered in the first half of the year helped the index outperform most benchmarks, it is still in the red for the year due to a massive drop in the third quarter.

The third quarter of 2015 was the worst for the U.S. financial markets overall since 2011. Not only the third quarter, several concerns including a slump in crude, China-led global growth worries, Grexit concerns, rate hike fears and a strengthening dollar dampened investor sentiment throughout the year.

*Returns as of Dec 28, 2015

Major Reasons for The Decline  

The slump in oil prices emerged as perhaps the main concern of the year. The absence of any reduction in oil supply by major oil producers OPEC, the U.S. and Russia persistently weighed on oil prices over the past one-year period. Meanwhile, a drastic decline in global oil demand -- including in China, the biggest consumer of oil -- had a negative impact on crude, which in turn dragged down energy shares over the year.

Sluggish growth conditions prevailing in major economies over the past one-year period were also behind the disappointing performance of the benchmarks. Despite several economic stimulus measures, including multiple currency devaluations and rate cuts in China, and a quantitative easing program in the Eurozone, economies continued to suffer for the most part of 2015. However, measures taken by the Bank of Japan to boost the country’s economy had a greater impact than what was felt in China and the Eurozone.

Concerns over the possibility of Greece’s exit from the Eurozone was another big worry in the first half of the year. Negotiations between Greece and its creditors continued through the first half, but the country defaulted on its debt repayment. However, the approval of an emergency loan to Greece’s banking system by the European Central Bank (ECB) and a number of effective negotiations between the country and its creditors eased the concerns.

Separately, fears of a rate-hike which finally came in the last month of the year left its share of impact on the benchmarks. In this backdrop, a strengthening U.S. dollar affected earnings of the major companies over the year.

A massive drop in biotech stocks in late August, which got extended following Hillary Clinton’s plan to prevent “price gouging” for specialty drugs, also had a negative impact on the markets. And to top it all, geo-political upheavals in regions like Yemen, Ukraine and Syria were rampant.  

These concerns also led to a high level of volatility, which affected small stocks as they are believed to be unstable relative to large- and mid-cap ones. The Russell 2000 Index which primarily comprises small-cap stocks thus registered bigger losses than the other major benchmarks.

How the U.S. Economy Performed?

The economy started the year on a sluggish note, registering only a 0.6% increase in first-quarter GDP as a harsh winter, cheaper oil prices and a stronger dollar upset the economy. Then the economy rebounded strongly in the second quarter to post a growth pace of 3.9% in GDP courtesy of healthy gains in consumer spending. But the economy failed to hold on the growth pace in the third quarter, expanding at a slower rate of only 2% due to a large trade deficit and a smaller increase in inventories.

Though economic data remained mixed throughout the year, the labor and housing market experienced a healthy pace of recovery over the period. Starting the year with a 5.7% unemployment rate, the level gradually declined to a more than seven-year low of 5%.

Meanwhile, over the most part of the year, the economy succeeded in generating more than 200,000 new jobs per month. Most of the housing data were encouraging throughout the year. These included a gradual increase in home prices that indicated an increase in demand.

Meanwhile, the lift-off that came this month for the first time in nearly a decade underlined the Fed’s, “confidence in the economy,” as cited by Fed Chair Janet Yellen herself. The Fed also indicated that “solid” consumer spending, a rebound in the housing market and strong business fixed investment played an important role in the decision. 

Top 5 Russell 2000 Performers

Though the index had a rough time throughout the year, some underlying stocks with strong fundamentals have clearly outperformed the index in the year-to-date frame. In this section, we highlight five top gainers of the index which also have a favorable Zacks Rank and a strong current-year EPS growth estimate. Also, these stocks have the last closing price of greater than $10.

Eagle Pharmaceuticals Inc. (EGRX - Snapshot Report) – a specialty pharmaceutical company – currently has a Zacks Rank #2 (Buy) and current-year EPS growth estimate of more than 100%. EGRX has returned 461.9% over the year-to-date frame.

ABIOMED, Inc. (ABMD - Analyst Report) is a developer, manufacturer and marketer of medical products designed to safely and effectively assist or replace the pumping function of the failing heart. The company currently has a Zacks Rank #2 and current-year EPS growth estimate of 11.5%. ABMD has returned 133.8% over the year-to-date frame.

Globant S.A. (GLOB - Snapshot Report) is a technology services provider that provides engineering, design, and innovation services. The company currently has a Zacks Rank #2 and current-year EPS growth estimate of 22.2%. GLOB has added 132.5% over the year-to-date frame.

Heska Corporation (HSKA - Snapshot Report) is focused on the discovery, development and marketing of companion animal health products. The company currently has a Zacks Rank #1 (Strong Buy) and current-year EPS growth estimate of 56.1%. HSKA has returned 112.9% over the year-to-date frame.

Dycom Industries Inc. (DY - Analyst Report) is a leading provider of specialty contracting services throughout the United States. The company sports a Zacks Rank #1 while its current-year EPS growth estimate is 62.7%. DY has returned 104.7% over the year-to-date frame.