Russell Investments’ mid-year market outlook: Strategists expect global reopening trade to stay on course through 2021

Team favours equities over bonds, the value factor vs. growth, and non-U.S. over U.S. stocks

Seattle, June 29, 2021 —  Russell Investments’ strategists see the global reopening on track at mid-year as COVID-19 vaccination rates climb, and the team believes potential risks such as inflation or a hawkish U.S. Federal Reserve (Fed) won’t derail it. Overall, the team maintains a moderately positive medium-term view on global equities in their mid-year global market outlook.

“We still like the pandemic-recovery trade that favours equities over bonds, the value factor over the growth factor and non-U.S. over U.S. stocks,” said Andrew Pease, global head of investment strategy at Russell Investments. “Inflation is the new concern, but the spike so far appears to be a combination of base effects and supply bottlenecks.”

The team expects it will take until the middle of 2022 for the U.S. economy to recover the lost output from the lockdowns and longer in other economies. They also believe broad-based inflation pressures are unlikely until then. 

“Market expectations for Fed lift-off in 2022 are premature,” Pease said. “We expect the Fed to commence tapering in 2022, with the second half of 2023 the likely timing for the first interest rate hike.”

At mid-year, the team also forecasts U.S. real gross domestic product (GDP) growth of 7% for 2021, which would be the best calendar-year outcome for the U.S. since 1984. The team sees a similarly strong post-lockdown recovery in Europe with 5% GDP growth for the year.

Russell Investments’ cycle, value and sentiment investment decision-making process at mid-year concludes global equities remain expensive, with the very expensive U.S. market offsetting better value elsewhere. Sentiment is close to overbought, but not near dangerous levels of euphoria. The strong cycle delivers a preference for equities over bonds for at least the next 12 months, despite expensive valuations. It also reinforces the team’s preference for the value equity factor over the growth factor and for non-U.S. equities to outperform the U.S. market. 

The best-performing asset classes since the reopening trade began November 6, 2020, when Pfizer announced the first successful COVID-19 vaccine, have been small cap and non-U.S. equities, global real estate investment trusts (REITS), commodities and the value factor. 

“The asset classes that performed poorly during the lockdown have been the winners in the post-vaccine phase, and we expect that pattern to continue for the next few months,” Pease said.

At the beginning of Q3 2021, the team’s views are summasized as follows:

  • Prefer non-U.S. equities to U.S. equities. “The post-vaccine economic recovery should favour undervalued cyclical value stocks over expensive technology and growth stocks. Relative to the U.S., the rest of the world is overweight cyclical value stocks,” Pease said.
  • Expect emerging markets (EM) equities, which have been laggards so far this year, to perform better in the second half as Chinese credit growth stabilises and vaccines become more available across emerging markets.
  • See high yield and investment grade credit as expensive on a spread basis but expect they should benefit from a positive cycle view that supports corporate profits growth and keeps default rates low.
  • View government bonds as expensive, with yields experiencing upward pressure as output gaps close and central banks look to taper back asset purchases. “We expect the U.S. 10-year Treasury yield to trade in the range of 1.5% to 2.0% over the second half of the year,” Pease said.
  • View real assets as no longer cheap, but they should still benefit from the pandemic-recovery trade. Real Estate Investment Trusts (REITs) have rebounded in anticipation of economic reopening and have recovered all their pandemic loss. Meanwhile, listed infrastructure has lost most of its valuation disadvantage to REITs and should benefit from the global recovery, boosting transport and energy infrastructure demand.
  • Expect the U.S. dollar will weaken later in 2021 as investors unwind Fed-tightening expectations and the global economic recovery becomes more entrenched (given the dollar typically gains during global downturns and declines in the recovery phase. They see the undervalued euro as the main beneficiary.


For more information, please see the team’s 2021 Global Market Outlook – Q3 update.

About Russell Investments

Russell Investments is a leading global investment solutions firm with $326.9 billion in assets under management (as of 3/31/2021) and $2.8 trillion in assets under advisement (as of 12/31/2020) for clients in 32 countries, The firm provides a wide range of investment capabilities to institutional investors, financial intermediaries, and individual investors around the world. Building on an 85-year legacy of continuous innovation to deliver exceptional value to clients, Russell Investments works every day to improve people’s financial security. Headquartered in Seattle, Washington, Russell Investments has offices in 19 cities around the world, including in New York, London, Tokyo, and Shanghai.

Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.

Contact: Steve Claiborne, 206-505-1858,