SEATTLE--(BUSINESS WIRE)--Russell Investments released its 2018 Global Market Outlook – Q2 Update today, offering economic insights and market forecasts from its global team of multi-asset investment strategists.
After a volatile start to the year, investors face complicated market conditions. U.S. tax cuts, synchronized global growth and strong corporate profits are battling monetary tightening and inflation pressures for control of global economies. The tailwinds are prevailing for now, but the strategists believe headwinds could overcome markets later in the year as interest rates rise, inflation picks up and profit margins come under pressure from rising labor costs. Protectionist trade policy has also emerged as a risk, but the team views a full-blown trade war as unlikely.
“We continue to see Europe, Japan and emerging markets outperforming the U.S. in what could be a relatively flat year for global equities,” said Andrew Pease, global head of investment strategy at Russell Investments. “We are still looking to add risk into market pull-backs, but we recognize that ‘buying the dips’ may become more challenging as markets grow more sensitive to recession risks later in the year.”
The U.S. is experiencing a highly unusual tug of war between fiscal and monetary policy with Congress passing tax cuts and a large increase in discretionary government spending, while the Fed will have to limit this stimulus to prevent the economy from overheating. In anticipation of rising inflation and faster rate hikes, 10-year U.S. Treasury yields have risen and are now in-line with the strategists’ fair value estimate. However, U.S. equities, in the team’s view, remain very expensive.
“The outlook for the U.S. economy and corporate profits in 2018 is strong, but the challenge for markets is that this optimism is already priced in,” said Paul Eitelman, multi-asset investment strategist for North America at Russell Investments. “Given our underweight preference for U.S. equities in multi-asset portfolios, we see global diversification and active management as important tactics for investors seeking to capture returns while managing downside risk.”
Outside the U.S., the eurozone continues its mid-cycle renaissance, according to the report, despite the strong euro. The team’s outlook for Asia-Pacific remains solid as global growth underpins demand and monetary policy remains relatively accommodative. The Japanese yen has overtaken the euro as the most attractive developed market currency, and the strategists see potential for its positive run to continue.
For more details on this report, please see the 2018 Global Market Outlook – Q2 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 $296 billion in assets under management (as of 12/31/2017).
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.
Investments in non-U.S. markets can involve risks of currency fluctuation, political and economic instability, different accounting standards and foreign taxation.
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.