Russell Investments’ 2017 Global Market Outlook – Q3 Update: Report Cautions as U.S. Market Momentum Overshoots Fundamentals

  • Expensive U.S. equities vulnerable to a pull-back
  • Treasuries remain expensive across regions
  • U.S. Federal Reserve (Fed) likely to halt rate hikes

SEATTLE--()--Russell Investments released its 2017 Global Market Outlook – Q3 Update today, offering economic insights and market forecasts from its global team of multi-asset investment strategists.

Russell Investments strategists advise caution in mid-2017’s late-cycle, momentum-driven market. The team believes investors in the U.S. market have embraced a type of cognitive dissonance: equity valuations are sky-high, but low treasury yields warn of lackluster growth. Their analysis of current market conditions has them leaning out of the U.S. rally and buying the next dip or potentially better opportunities outside the U.S. market. They see the strongest tailwinds for equity returns in Europe, followed by emerging markets and Japan. The team also views government bonds as expensive across markets, especially in Germany and the UK, indicating in their view that yields will likely trend upward in the medium term after remaining in a range for the next few months.

“U.S. bond investors currently seem to be from Mars while equity investors are from Venus,” said Andrew Pease, global head of investment strategy at Russell Investments. “In this late-cycle market with contradictory views on the U.S. economy, we’d lean toward Europe in a globally diversified, multi-asset portfolio for potentially better opportunities to help find returns and manage risk.”

Pease added that he believes the cautious outlook for U.S. growth combined with the recent slowdown in core inflation will likely prevent a Fed funds rate hike for the rest of 2017, though it likely will begin winding down its balance sheet later this year. The strategists continue to look for 10-year U.S. Treasury yields to slowly shift up to 2.5% over the next 12 months.

“The U.S. economy is resilient and recession risks appear to be contained, however, the outlook for growth remains mediocre,” said Paul Eitelman, multi-asset investment strategist for North America at Russell Investments. “We continue to have an underweight preference for U.S. equities in global, multi-asset portfolios, primarily due to their expensive valuations.”

For more information on the annual report, which also includes the strategists’ latest views on Europe, Asia-Pacific and currencies, please see the 2017 Global Market Outlook – Q3 Update.

About Russell Investments

Russell Investments, a global asset manager, offers multi-asset portfolios and services which include advice, investments and implementation. Russell Investments stands with institutional investors, financial advisors and individuals working with their advisors—using the firm’s core capabilities that extend across capital market insights, manager research, asset allocation, portfolio implementation and factor exposures—to help each achieve their desired investment outcomes. The firm has more than $266 billion in assets under management, with $123.7 billion in multi-asset solutions (as of 3/31/2017).

Headquartered in Seattle, Washington, Russell Investments operates globally with 21 offices, providing investment services in the world’s major financial centers such as London, Paris, Amsterdam, Sydney, Tokyo, Shanghai, Toronto and New York. For more information about how Russell Investments helps to improve financial security for people, visit russellinvestments.com or follow @Russell_Invest.

These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.

Investing involves risk and principal loss is possible.

Forecasting is inherently uncertain and may be incorrect. It is not representative of a projection of the stock market, or of any specific investment.

Investments that are allocated across multiple types of securities may be exposed to a variety of risks based on the asset classes, investment styles, market sectors, and size of companies preferred by the investment managers. Investors should consider how the combined risks impact their total investment portfolio and understand that different risks can lead to varying financial consequences, including loss of principal.

Russell Investments’ ownership is composed of a majority stake held by funds managed by TA Associates with minority stakes held by funds managed by Reverence Capital Partners and Russell Investments’ management.

Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the “FTSE RUSSELL” brand.

Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

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Contacts

For Russell Investments
Steve Claiborne, 206-505-1858
newsroom@russelllinvestments.com
or
Emily Serafin, 718-875-2122
russell_investments@neibartgroup.com

Release Summary

Russell Investments releases its 2017 Global Market Outlook – Q3 Update, with the firm's latest economic insights and market forecasts.

Contacts

For Russell Investments
Steve Claiborne, 206-505-1858
newsroom@russelllinvestments.com
or
Emily Serafin, 718-875-2122
russell_investments@neibartgroup.com