Andrew Sneddon, Managing Director – Multi-Asset Solutions, discusses Russell Investments’ performance in the June quarter and the outlook for the remainder of 2017.

Andrew Sneddon, Managing Director – Multi-Asset Solutions, discusses Russell Investments’ performance in the June quarter and the outlook for the remainder of 2017.

Here's a summary of investment markets for the financial year ending 30 June 2017.

Here’s a summary of investment markets for the three months ending 30 June 2017.

President Trump and the Republicans in Congress have set out to achieve a very aggressive legislative agenda in their first 200 days. These policy initiatives pose an intricate web of positive and negative threads for global investors to grapple with. We’ve written extensively about how difficult it is to get things done in Washington DC. And the Trump Administration has not been immune to these challenges.

The U.S. economy still looks resilient but mediocre. Incoming data during the second quarter proved consistent with our below-consensus growth forecast for 2017. The bigger surprise has come from the sharp slowdown in core inflation. We think this should put a halt to further Fed funds rate hikes this year. The lack of pricing power also poses a medium-term threat to corporate profitability.

The political risks to the eurozone project are fading after elections in France, Austria and the Netherlands put centrists into power. A pro-euro, pro-globalization reform agenda could make the single European currency more appealing in the longer term.

The developing Asia-Pacific economies are powering ahead like the speedy hare in the classic fable, although we are less optimistic on the outlook for some of the more developed regional countries that plod along like the fable’s tortoise. Resilient global trade continues to be a tailwind, and AsiaPacific equities currently appear slightly expensive after a strong secondquarter performance.

Our modeling inputs appear stuck in neutral for 2017, offering no reason to change our outlook on equities or recession risk.

We still want to buy dips and sell rallies against the backdrop of an expensive U.S. equity market, a broadly neutral earnings outlook, and sentiment indicators that point to complacency. Europe and, to a lesser extent, Japan and emerging markets (EM) have better cycle support. Government bonds are expensive, but a lack of global inflation pressure should keep yields in a range.