https://russellinvestments.com/uk/rss/blogSubscribe to receive our latest blog posts.en-GB{8EADF4B0-E6F3-49D8-ABFB-2D10E758691C}https://russellinvestments.com/uk/blog/iran-conflict-could-reshape-portfolio-risk<p><strong><span>Key takeaways</span></strong></p> <ul style="list-style-type: disc;"> <li><span>The U.S. airstrikes on Iran’s nuclear sites appear designed to deter proliferation without provoking full-scale conflict. Israel and Iran have since agreed to a ceasefire for now. </span></li> <li><span>While Tehran has incentives to avoid escalation, internal pressure and damaged confidence may drive symbolic or asymmetric retaliation.</span></li> <li><span>Three scenarios may unfold: limited retaliation (low market impact), to “weaponised uncertainty” in the Strait of Hormuz (inflationary risk), to rogue escalation (a tail-risk event).</span></li> <li><span>For now, asset prices remain stable, but the return of geopolitical risk signals a more fragile and volatile investment environment ahead.<br /> </span> <div> </div> </li> </ul>Tue, 24 Jun 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;&lt;span&gt;The U.S. airstrikes on Iran&amp;rsquo;s nuclear sites appear designed to deter proliferation without provoking full-scale conflict. Israel and Iran have since agreed to a ceasefire for now.&amp;nbsp;&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;While Tehran has incentives to avoid escalation, internal pressure and damaged confidence may drive symbolic or asymmetric retaliation.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Three scenarios may unfold: limited retaliation (low market impact), to &amp;ldquo;weaponised uncertainty&amp;rdquo; in the Strait of Hormuz (inflationary risk), to rogue escalation (a tail-risk event).&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;For now, asset prices remain stable, but the return of geopolitical risk signals a more fragile and volatile investment environment ahead.&lt;/span&gt;&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;Over the weekend, the United States launched precision airstrikes on Iranian nuclear facilities, marking a dramatic escalation as it joined Israel in intensifying regional tensions.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On Monday, Iran retaliated by striking a U.S. military base in Qatar. This exchange was followed on Tuesday by a declaration of ceasefire. For now, after comments from President Trump, both Israel and Iran appear to be honouring the agreement, despite suggested violations.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;In a year already marked by elevated macro uncertainty, these developments have injected a new source of geopolitical risk into markets. Understandably, investors are wondering about the potential impact on their investment portfolios. To address this topic, we review the key questions investors should focus on.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 24px;&quot;&gt;&lt;strong&gt;What&amp;rsquo;s the Endgame?&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;The U.S. strikes appear intended to avoid triggering a full-scale war. The limited scope, focusing only on Iran&amp;rsquo;s nuclear capabilities, suggests it was intended as a &amp;ldquo;one-and-done&amp;rdquo; operation aimed at deterring Iran and nudging it toward negotiations on U.S. and Israeli terms.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;If that&amp;rsquo;s the goal, it&amp;rsquo;s a high-stakes gamble: disrupt Iran&amp;rsquo;s nuclear momentum enough to create leverage but avoid dragging the U.S. into a broader war in an election year.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;Since the U.S. strikes, the &amp;ldquo;one-and-done&amp;rdquo; operation appears to have achieved its intended effect. However, it is an open question if Israel&amp;rsquo;s objectives have been met.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 24px;&quot;&gt;&lt;strong&gt;What Happens Now?&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;Tehran&amp;rsquo;s agreement to a ceasefire after promising to retaliate to U.S. strikes indicates their government&amp;rsquo;s rhetoric is often more about shaping perception than previewing action. As with past confrontations, what matters most is not what Iran says, but what it does.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;While the situation remains highly fluid, we believe three broad scenarios are now in play. Recent ceasefire negotiations suggest that Scenario 1 is currently the most likely outcome, though this remains subject to change.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 24px;&quot;&gt;&lt;strong&gt;Scenario 1 &amp;ndash; Limited Retaliation&lt;/strong&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;&amp;nbsp;&lt;br /&gt; &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;Symbolic retaliation was the most likely near-term path. Iran sharing its plans with Qatar before the attack demonstrated an intention to deescalate the situation. This followed a similar script to the Soleimani episode in 2020, where missile strikes appeared designed to avoid U.S. casualties.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;&lt;strong&gt;Market Impact:&lt;/strong&gt; Markets have rallied on the ceasefire news and oil prices have fallen below the price when Israel started its attack on Iran. If this scenario continues to play out, we would expect client portfolios to be influenced more by other factors beyond geopolitical headlines, such as growth and inflation dynamics.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 24px;&quot;&gt;&lt;strong&gt;Scenario 2 &amp;ndash; Weaponised Uncertainty&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;We can&amp;rsquo;t rule out just yet a scenario where Iran initiates calibrated disruptions in the Strait of Hormuz. Although Iran has little incentive to fully shut the waterway unless truly cornered, it could look to cause damage by fracturing its reliability but not inflict enough damage to force retaliation from the U.S. This &amp;ldquo;weaponization of uncertainty&amp;rdquo; could move oil prices higher without a formal blockade.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;&lt;strong&gt;Market Impact:&lt;/strong&gt; This scenario can increase the risk of higher inflation over the coming months, reducing the appetite for central banks to cut rates. Client portfolios could be impacted through higher interest rates.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Scenario 3 &amp;ndash; Rogue Escalation&lt;/strong&gt;&lt;/span&gt;&lt;br /&gt; &lt;span style=&quot;font-size: 18px;&quot;&gt;&lt;/span&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;Actions such as targeting Gulf oil infrastructure or disrupting the Strait of Hormuz would escalate tensions significantly. Shutting down Hormuz, through which ~20% of global oil flows pass, would likely trigger a sharp spike in oil prices and heighten global recession risk. However, there is no guarantee Iran has the capability to do this and to do so would mostly impact China.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;&lt;strong&gt;Market Impact: &lt;/strong&gt;We consider this a low probability, high impact scenario in which oil disruptions create a drag on global growth and inflation increases meaningfully. This would produce a drastic repricing of risk assets and have a material impact on client portfolios.&lt;/span&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 24px;&quot;&gt;&lt;strong&gt;Tempered Response&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;So far, markets have not been moved much by the events in the region. Oil prices are back to pre-Israel attack levels and far from crisis levels. This suggests investors see this as a contained event with no further impact. Still, it&amp;rsquo;s likely that a geopolitical risk premium is being gradually embedded in energy prices, even without a major disruption in the oil supply.&lt;/span&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;The macro impact of a major oil shock would be global, but also uneven. As we have highlighted before, the U.S. is relatively insulated due to its domestic energy production while Europe and Asia are more vulnerable. For central banks already navigating a delicate disinflation path, another oil-driven price shock would complicate the outlook and potentially delay or reverse expected rate cuts.&lt;/span&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;As of today, the broad economic narrative remains intact. The most plausible path ahead is one of elevated uncertainty, with intermittent flare-ups that may not shift the base case but will increase volatility around it.&amp;nbsp;&lt;/span&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 24px;&quot;&gt;&lt;strong&gt;The Bottom Line&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;For now, markets are betting this conflict doesn&amp;rsquo;t spiral. That might prove right. But it&amp;rsquo;s important to recognise that geopolitical risk remains a source of volatility. Investors should keep an eye on more than just inflation prints and earnings beats &amp;ndash; they need to get used to having more questions than answers.&lt;/span&gt;&lt;/span&gt;&lt;/p&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;style&gt; &lt;/style&gt;Pierre Dongo Soria<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {AD56235A-D932-4FE0-B33F-DFEC1D73BD79}https://russellinvestments.com/uk/blog/escalation-in-middle-east-hit-markets<p><strong><span>Key takeaways</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Markets de-risk in anticipation of potential conflict escalation</span></li> <li><span>U.S. less exposed to the energy shock than Europe</span></li> <li><span>Overall market sentiment remains calm<br /> </span> <div> </div> </li> </ul>Fri, 13 Jun 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;&lt;span&gt;Markets de-risk in anticipation of potential conflict escalation&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;U.S. less exposed to the energy shock than Europe&lt;br /&gt; &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Overall market sentiment remains calm&lt;br /&gt; &lt;/span&gt; &lt;div&gt;&amp;nbsp;&lt;/div&gt; &lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On Thursday evening, Israel launched an airstrike against Iran, damaging the country&amp;rsquo;s nuclear facilities while also hitting Iran&amp;rsquo;s military leadership and senior scientists.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;An Israeli official commented that the operation will last &amp;ldquo;at least two more weeks&amp;rdquo;. In our view, the conflict marks one of the riskiest moments for the Middle East in many years.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 24px;&quot;&gt;&lt;strong&gt;Markets De-risk&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;Markets traded risk-off in overnight futures. As of 13:40pm BST, the S&amp;amp;P 500 sold off 0.9%,&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;Brent crude oil jumped 7.5%, the U.S. Dollar Index (DXY) was up 0.5%, and the 10-year Treasury yield was down just a basis point as the crosscurrents from a flight to safety and higher energy prices buffeted government bonds.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;After an initial shock, markets calmed somewhat, with Brent crude oil dropping roughly 4.5%, from an overnight peak of $78.5 per barrel, to $74.5.&lt;br /&gt; &lt;/span&gt;&lt;/p&gt; &lt;div&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Oil Price Surges&lt;/strong&gt;&lt;/span&gt;&lt;/div&gt; &lt;p&gt;Daily change in Brent oil sees largest spike in years&lt;/p&gt; &lt;p&gt;&lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/june13revised.png&quot; /&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Source: LSEG Datastream. Data as of 13th June 2025.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Watch Points&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;The conflict will be a key focus for investors through Friday&amp;rsquo;s session and into the weekend. We believe he most consequential watch point for global markets will be if there are disruptions to cargo transitioning the Strait of Hormuz &amp;ndash; a chokepoint bordering Iran that roughly 20% of global crude oil and petroleum products pass through each year.&amp;nbsp;&lt;br /&gt; Market focus will also likely center on whether the fighting escalates further e.g. if Israel attacks the political leadership in Iran and if Iran damages Israeli or U.S. assets in the region. The development also puts into doubt whether Iran will partake in the latest round of negotiations with the U.S. that were scheduled to take place over the weekend.&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;U.S. Exposure&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;From a fundamental perspective, it&amp;rsquo;s important to note that the U.S. is less exposed to energy shocks than it was back in the 1970s and 1980s. The U.S. is now the biggest oil and gas producer in the world, a net exporter of crude oil. Additionally, the wallet share of U.S. consumption on gasoline and other energy goods has halved since the early 70s, further reducing the country&amp;rsquo;s exposure to the conflict.&lt;/p&gt; &lt;p&gt;Given these mitigating factors, we estimate higher energy prices to dent U.S. real GDP growth by 0.2 percentage point and to boost core PCE prices by about a tenth of a percent &amp;ndash; another stagflationary impulse on top of prevailing growth and inflation concerns. However, we currently do not see the changes as material enough yet to meaningfully reshape the likelihood of recession.&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;European Outlook&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;In contrast to the U.S., Europe&#39;s economic outlook is more sensitive to oil shocks. High dependency on imported energy, particularly natural gas and crude oil, positions Europe at greater economic risk from prolonged disruptions or sustained high prices. These factors, particularly if they intensify, could increase inflationary pressures and impact the economic growth experienced in the region since the start of the year.&amp;nbsp;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Sentiment remains Stable&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;Following the strong market rally since early April, our measure of investor sentiment no longer shows panic. The moderate selloff overnight is insufficient to change that conclusion. Our sentiment process will be an important building block for our strategy as we track markets in the days ahead.&amp;nbsp;&lt;/p&gt; &lt;p&gt;We do not currently see significant dislocations in markets and believe maintaining current portfolio positioning is appropriate.&lt;/p&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;style&gt; &lt;/style&gt;Paul Eitelman<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {A285328D-2103-4E4A-98CD-9D2AD0807FD0}https://russellinvestments.com/uk/blog/china-slowdown-trade-talks-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>U.S., China to resume trade negotiations</span></li> <li><span>Job openings rise in U.S. </span></li> <li><span>ECB cuts rates, BoC holds steady </span></li> </ul>Fri, 06 Jun 2025 01:58:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;&lt;span&gt;U.S., China to resume trade negotiations&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Job openings rise in U.S. &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;ECB cuts rates, BoC holds steady &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On this week’s edition of Market Week in Review, Director and Senior Investment Strategist Alex Cousley discussed recent trade developments and economic data from the United States and China. He also unpacked the latest rate decisions from the European Central Bank (ECB) and the Bank of Canada (BoC). &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Call Me Maybe &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;President Donald Trump and other U.S. officials recently expressed frustrations with China over a lack of follow-through on concessions made in May’s temporary trade deal. “In particular, government leaders complained China was dragging its feet on increasing exports of rare earth minerals to the U.S.,” Cousley explained.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; The uptick in tensions between the two countries led both sides to push for a phone call between Trump and Chinese President Xi Jinping. Cousley said the two leaders spoke for 90 minutes on Thursday, with the details of their call mostly unknown.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; “What we do know is that Trump and Xi committed to another round of trade talks, which is very encouraging to see,” he said. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Mixed Bag &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Cousley said the latest U.S. economic data paints a mixed picture for the economy. Some “soft” data indicators—like &lt;a href=&quot;https://russellinvestments.com/uk/blog/confidence-heats-up-mwir&quot;&gt;consumer confidence&lt;/a&gt;—have improved, while other measures have declined. For instance, the PMI (purchasing managers’ index) reading for the services sector came in softer than expected, falling into contractionary territory for the first time in a year. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; The latest “hard” data was also split, Cousley said. “The job openings report for April was a big surprise to the upside, showing a healthy rebound in labor demand from businesses. On the other hand, May’s employment snapshot of the private sector was notably weaker than April’s,” he commented. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; In China, the latest PMI surveys were softer than expected, demonstrating the Chinese economy continues to struggle. “This suggests China will probably be more inclined to strike a trade deal with the United States. Being in the middle of a trade war while your economy is struggling would not be a good place to be,” Cousley said. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;More Cuts Coming&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Both the ECB and the BoC held policy meetings this week, with the ECB cutting rates by 0.25% in a widely expected decision. “Looking ahead, we expect one or two additional cuts from the ECB this year due to Europe’s macroeconomic backdrop,” Cousley said.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; Meanwhile, the BoC left interest rates unchanged at 2.75%. However, Cousley said Canada’s central bank will probably resume rate cuts later this year.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; “The Canadian economy is not doing particularly well. The &lt;a href=&quot;https://russellinvestments.com/uk/blog/June-rate-cut-chances-fall-in-UK-Canada-MWIR&quot;&gt;unemployment rate is edging higher&lt;/a&gt;, which I believe strengthens the case for lowering rates in the months ahead,” he stated. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/EhQ7hhoVwvU&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/17292004&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;Alexander Cousley<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {CAA634A6-AA23-4DD6-93B0-B103BE3450C1}https://russellinvestments.com/uk/blog/confidence-heats-up-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Strong rally in U.S. stocks</span></li> <li><span>Consumer confidence rebounds</span></li> <li><span>Q1 earnings shatter expectations </span></li> </ul>Fri, 30 May 2025 04:48:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;&lt;span&gt;Strong rally in U.S. stocks&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Consumer confidence rebounds&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Q1 earnings shatter expectations &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On this week’s edition of Market Week in Review, Chief Investment Strategist Paul Eitelman recapped recent stock and bond market performance. He also discussed the rebound in consumer confidence and first-quarter earnings. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Rally Time &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;U.S. stocks rose during the holiday-shortened trading week, with the S&amp;P 500 advancing nearly 2% through Thursday’s close. Stocks also performed well globally, with the MSCI All-Country World Index rising slightly above 1%.&lt;/span&gt;&lt;/p&gt; Eitelman said the &lt;a href=&quot;https://russellinvestments.com/uk/blog/Trade-Tone-Market-Rally-MWIR&quot;&gt;stock market’s broad rally since early April&lt;/a&gt; has been nothing short of phenomenal. For instance, the S&amp;P 500 has shot up over 6% during May alone—a move he called outstanding. &lt;p /&gt; &lt;p&gt;&lt;span&gt; The good news has also carried over to the fixed income space, where credit spreads have narrowed significantly. “Spreads are now the tightest they’ve been since President Trump’s ‘Liberation Day’ announcement,” Eitelman said. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; Government bond yields have also ticked lower over the past few weeks, soothing investors rattled by &lt;a href=&quot;https://russellinvestments.com/uk/blog/treasury-yields&quot;&gt;April’s big upward spike&lt;/a&gt;. This includes the yield on the 10-year Treasury note, which fell 0.08% this week, Eitelman said. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Open to Optimism &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;In another positive development, there are hints that confidence among U.S. consumers and businesses is on the rebound. “We’re seeing signs of life in the latest surveys, following some &lt;a href=&quot;https://russellinvestments.com/uk/blog/hard-data-points-soft-landing-mwir&quot;&gt;pretty weak numbers&lt;/a&gt; in April,” Eitelman said. As evidence, he pointed to The Conference Board’s measure of consumer confidence, which increased by 12 points from April to May. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; “This encouraging news also suggests the gap between how consumers feel and how consumers act—the difference between &lt;a href=&quot;https://russellinvestments.com/uk/blog/Tariff-truce-recession-risks-mwir&quot;&gt;soft and hard data&lt;/a&gt;—might be narrowing,” Eitelman remarked. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; U.S. businesses also appear to be more optimistic about the overall environment. The latest regional Fed manufacturing surveys show a notable rebound in companies’ plans for future spending, he explained. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; “Capex intentions are now back to where they were at the start of 2025. That’s a notable bounceback from the weaker levels we saw the last few months, when businesses were much more concerned about the impact of tariffs,” Eitelman said. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Upside Surprise &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;First-quarter earnings season is wrapping up in the U.S. with generally strong results. Earnings growth for the quarter is tracking around 15% on a year-over-year basis—double what consensus expectations were coming into the reporting period, Eitelman noted.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; “This has been a nice positive surprise. We’ve seen broad-based strength across the S&amp;P 500, with some of the tech companies in particular really being sources of resilience,” he concluded. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/iN97gmRK0vw&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/17253642&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;Paul Eitelman<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {12D6A043-EF5A-4944-A76E-1486A4436A90}https://russellinvestments.com/uk/blog/db-surplus-rules-get-a-makeover<span style="line-height: 115%;">Laws on how pension schemes can use surpluses have a new look.</span> <style> </style> <style> </style> <style> </style>Fri, 30 May 2025 00:00:00 -0700&lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;After a long wait, the government has finally published its much-anticipated response to the Options for Defined Benefit (DB) Schemes consultation.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The headline? Plans to modernise how scheme surpluses can be used, reduce regulatory barriers, and offer trustees and employers greater flexibility. The response signals a welcome shift toward credible alternatives to buyouts &amp;mdash; not only encouraging run-on approaches but also keeping the door open for consolidator models.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Top 5 Takeaways&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;1. Statutory Override for Trustees&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Trustees will gain new powers to amend scheme rules and unlock surplus funds. This power is optional and designed to ensure trustees remain fully responsible for protecting member benefits.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;2. Lower Surplus Extraction Threshold&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The government plans to reduce the surplus sharing threshold from buyout funding to full funding on a low-dependency basis. Given that around 75% of DB schemes are already at this level, this change could unlock significant trapped surplus.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;3.&amp;nbsp;&lt;/strong&gt;&lt;/span&gt;&lt;strong style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;Clarity on Trustee Duties&lt;/strong&gt;&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Legal amendments under Section 37 will clarify that trustees must act in line with their existing fiduciary duties when deciding on surplus extraction, removing previous uncertainty.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;4. Tax Rate Remains at 25%&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The 25% tax on surplus extraction will stay unchanged, although the government is continuing to review the wider tax regime.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;5. Consolidator Delayed &lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;A government-backed consolidator, aimed at underfunded and smaller schemes, remains under review. However, it will not be included in the forthcoming Pensions Bill, so it&amp;rsquo;s still something to watch but not expect imminently.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;What Happens Next?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;There&amp;rsquo;s a lot to unpack here, and these proposals will undoubtedly influence the DB market&amp;rsquo;s evolution over the coming years. The government has set the direction, but many important details will be fleshed out in the forthcoming Pensions Bill &amp;mdash; which is eagerly awaited.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;img alt=&quot;Paul Eitelman, CFA&quot; style=&quot;width: 130px; height: 127px; float: left; margin-right: 30px; margin-bottom: 20px; margin-top: 20px;&quot; src=&quot;/-/media/images/global/headshots/h-q/merchant-aqib.webp?w=130&amp;amp;h=127&amp;amp;hash=8B4178E57E6F6DE8A451A3E46A7BE5D6&quot; /&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top: -5px;&quot;&gt;&lt;em&gt;&lt;strong&gt;&quot;Governance, flexibility, and risk management will be vital to navigating this new landscape.&quot;&lt;/strong&gt;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;Aqib Merchant&lt;/strong&gt;&lt;br /&gt; Associate Director, EMEA Clients Team&lt;br /&gt; Russell Investments&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;For schemes considering running on, investment strategy will be critical. Trustees will need to carefully balance releasing surplus with investing prudently to absorb market shocks and maintain the low-dependency position. They&amp;rsquo;ll also need to explore cashflow-generating assets but won&amp;rsquo;t want to put all their eggs in UK corporate bonds.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Ultimately, governance, flexibility, and risk management will be vital to navigating this new landscape. These themes featured prominently in a &lt;a rel=&quot;noopener noreferrer&quot; href=&quot;https://www.professionalpensions.com/sponsored/4413790/investing-surplus-extraction-run&quot; target=&quot;_blank&quot;&gt;recent Professional Pensions roundtable &lt;/a&gt;on surplus extraction and run-on that we spoke at, highlighting the sector&amp;rsquo;s readiness to embrace change &amp;mdash; once the rules are clearer.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The Bottom Line&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; Surplus flexibility is here, the consolidator remains a work in progress, and the Bill? Well, it&amp;rsquo;s still fashionably late &amp;mdash; but hopefully not for much longer.&lt;/span&gt;&lt;/p&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt; &lt;style&gt; &lt;/style&gt;Aqib Merchant<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {D6AAC57C-1305-45E4-A3AF-A6DFE1DB0096}https://russellinvestments.com/uk/blog/june-rate-cut-chances-fall-in-uk-canada-mwir<p><strong><span>Key takeaways:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Inflation ticks up in Canada and the UK</span></li> <li><span>U.S. economy still looks robust</span></li> <li><span>Bond yields rise on U.S. budget bill concerns </span></li> </ul>Fri, 23 May 2025 02:09:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key Takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;&lt;span&gt;Inflation ticks up in Canada and the UK&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;U.S. economy still looks robust&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Bond yields rise on U.S. budget bill concerns &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the newest edition of Market Week in Review, Senior Investment Strategist and Head of Canadian Strategy, BeiChen Lin, unpacked the latest UK and Canadian inflation numbers. He also weighed in on recession risks and recent market performance. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Inflation Nations&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin said core inflation in both the United Kingdom and Canada topped consensus expectations in April. While acknowledging the latest numbers were a setback for both countries, he stressed the path to lowering inflation is never a linear one. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; “There’s always going to be twists and turns along the way, and it might take some time for the Bank of England and the Bank of Canada to bring inflation down to 2%. But I do think both banks will get there over the medium term,” he said.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; Markets have reduced the chances for rate cuts in the UK and Canada next month, but Lin expects more will be needed later in the year. A weak economic environment prompted the Bank of Canada to be the most aggressive G-7 central bank this rate-cutting cycle, with officials slashing interest rates by a cumulative 2.25% before pausing in April. Although these interest rate cuts have helped Canada avoid an official recession so far, more cuts later this year are likely needed due to the ongoing fragility in the economy. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; “With the unemployment rate hovering near 7%, the risk of a recession in Canada is above average and higher than in the United States,” Lin remarked. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Split Stats&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Next, Lin turned to preliminary PMI (purchasing managers’ index) readings, which are typically leading economic indicators. In the U.S., preliminary PMIs for May pointed to resilience in both the manufacturing and services sectors. “Both readings were above 50, which indicates expansionary conditions,” he said. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; The story was different in Europe, with the preliminary numbers suggesting contractionary conditions. This was largely driven by softer-than-expected data in the services industry, Lin remarked.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; Overall, he said the U.S. is still &lt;a href=&quot;https://russellinvestments.com/uk/blog/Tariff-truce-recession-risks-mwir&quot;&gt;probably headed for a soft landing&lt;/a&gt;, while recession risks look a little higher in other countries. On the other hand, U.S. stocks continue to appear a little more expensive than non-U.S. stocks, Lin noted. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; “Balancing these two factors out, we think maintaining a neutral asset allocation across regions makes the most sense right now,” he stated. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Staying Neutral &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin noted U.S. stocks have &lt;a href=&quot;https://russellinvestments.com/uk/blog/Trade-Tone-Market-Rally-MWIR&quot;&gt;fully recovered from their April slide&lt;/a&gt; and are now within striking distance of all-time highs. On the flip side, U.S. bond yields have risen on concerns that the new budget bill could add to the federal deficit. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; “In this market environment, we’re neutral on both U.S. equities and bonds, especially due to the elevated macroeconomic uncertainty,” Lin said. He added that a key watchpoint moving forward will be whether more trade deals are reached as President Trump’s 90-day pause on reciprocal tariffs comes closer to expiring. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/Y4UlvOr_MtY&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/17215445&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt; BeiChen Lin<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {5FC778B8-042B-4D7E-959E-37F48872ADDB}https://russellinvestments.com/uk/blog/tariff-truce-recession-risks-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>U.S. recession chances ease slightly</span></li> <li><span>Gradual credit recovery in China </span></li> <li><span>U.S. labor market remains resilient</span></li> </ul>Fri, 16 May 2025 02:23:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;&lt;span&gt;U.S. recession chances ease slightly&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Gradual credit recovery in China &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;U.S. labor market remains resilient&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Director and Senior Investment Strategist Alex Cousley discussed how recent trade developments could impact recession risks. He also reviewed credit data from China and the latest employment figures from the United States.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Trade Relief&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Cousley said the &lt;a href=&quot;https://russellinvestments.com/uk/blog/giant-step-in-us-china-tariff&quot;&gt;temporary U.S.-China trade agreement&lt;/a&gt;, which substantially reduces tariffs between the two countries, was a very encouraging development. “The deal, which lowers U.S. tariffs on Chinese imports to 30% and Chinese tariffs on U.S. imports to 10%, is good for 90 days while negotiations continue,” he explained.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; As a result, the risks of a U.S. recession in the next 12 months look a little lower, Cousley said. “We peg the odds between 35-40%, which is still higher than normal,” he remarked.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; In addition to the ongoing talks with China, the U.S. is also holding trade discussions with India, Japan and South Korea. Of these three countries, Cousley said the U.S. is probably closest to securing a deal with India.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Stimulus on Standby&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;The latest credit data from China points to a gradual improvement in lending rather than a huge pickup, Cousley said. “There hasn’t been a strong resurgence in credit demand yet. I think this is due to softness in the Chinese economy and uncertainty around trade,” he remarked.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; Looking forward, Cousley said more monetary easing is likely from the People’s Bank of China. The government could also provide a little more fiscal stimulus, although he said that might be less likely if trade relations with the U.S. continue to improve. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Data Divide&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Cousley wrapped up by noting the &lt;a href=&quot;https://russellinvestments.com/uk/blog/trade-talks-job-market-mwir&quot;&gt;theme of “soft” soft data and “hard” hard data&lt;/a&gt; continues to be in play. He explained that soft data—like business and consumer surveys—remains weak, while hard data—like job listings and consumer spending—is still holding up well.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; As evidence, Cousley said the latest U.S. sales and jobless claims numbers were both fairly solid. “U.S. consumers still appear resilient, and we’re not seeing any signs of rising stress in the labor market,” he explained. Cousley said it’s possible the divergence between hard and soft data could begin to narrow in light of the latest trade developments.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; “If trade tensions continue to improve, the soft data might start to bottom out and perhaps trend more positive over time,” he concluded. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/MvH2obWG5Gc&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/17175137&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;Alexander Cousley<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {61F13258-F66D-45CA-840C-47648D09E715}https://russellinvestments.com/uk/blog/private-markets-playbook-q1-2025How to spot opportunities and gain exposure to private investments without taking on too much risk.Wed, 14 May 2025 00:00:00 -0700&lt;!--START AYESHA PHOTO AND TITLE HERE--&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;&lt;em&gt;The game plan for building more innovative, resilient portfolios in the face of uncertainty.&lt;/em&gt;&lt;/strong&gt;&lt;/p&gt; &lt;div class=&quot;col-sm-4&quot; style=&quot;padding-left: 30px; float: right;&quot;&gt; &lt;img src=&quot;/-/media/images/global/headshots/h-q/leverett-vic.png&quot; alt=&quot;Vic Leverett&quot; /&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;Vic Leverett&lt;/strong&gt;&lt;br /&gt; Managing Director, Head of Alternative Investments&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&amp;nbsp;&lt;/p&gt; &lt;/div&gt; &lt;p class=&quot;delta&quot;&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;As the economic landscape continues to evolve&amp;mdash;with heightened volatility in money markets, fluctuating inflation expectations, and tightening liquidity conditions&amp;mdash;private markets are emerging as an essential component of modern portfolios. Investors are increasingly turning to private assets for the potential of enhanced returns, greater diversification, and insulation from public market swings.&lt;/span&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt; Still, private investments are not without complexity. They require a long-term view, rigorous diligence, and careful planning&amp;mdash;especially in today&#39;s environment. One of the most common pitfalls we see is investors entering the space without a clear strategy. Private investments are not one-size-fits-all. To truly unlock their value, investors need access to a diversified range of opportunities across private equity, venture capital, infrastructure, real estate, and private credit.&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Success in private markets depends on more than just timing. It requires knowing where to look and who to partner with. It means being able to balance opportunity with liquidity. With the right playbook&amp;mdash;and access to the right managers&amp;mdash;investors can build more resilient portfolios and help clients meet their long-term goals, even amid uncertainty. At Russell Investments, we recognize that every investor&#39;s journey is different. We&#39;re well-positioned to offer the access and expertise to get you where you want to go.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;WHAT&#39;S MOVING MARKETS&lt;/strong&gt;&lt;/p&gt; &lt;div class=&quot;col-sm-3&quot; style=&quot;float: left;&quot;&gt; &lt;img alt=&quot;Federal or municipal building icon&quot; src=&quot;/-/media/images/global/icons/black-icons/federalbuildingb_new.svg?h=265&amp;amp;w=265&amp;amp;hash=FD31137CD8AB391530DCD82034CF9BA0&quot; style=&quot;width: 265px; height: 265px; margin-top: -15px;&quot; /&gt;&lt;/div&gt; &lt;div class=&quot;col-sm-9&quot; style=&quot;float: left;&quot;&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top:10px;&quot;&gt;&lt;strong&gt;Macro Volatility and Monetary Policy&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;Recent swings in money markets reflect deep uncertainty around the path of interest rates and inflation. Central banks remain cautious, and higher-for-longer rate scenarios are adding pressure to traditional fixed income. In contrast, private credit and real asset strategies are emerging as compelling alternatives, offering potentially higher yields and better risk-adjusted returns.&lt;/p&gt; &lt;/div&gt; &lt;br clear=&quot;all&quot; /&gt; &lt;div class=&quot;col-sm-3&quot; style=&quot;float: left;&quot;&gt; &lt;img alt=&quot;Screen with padlock in a magnifying glass&quot; src=&quot;/-/media/images/global/icons/black-icons/tariffstradetensions.svg&quot; /&gt;&amp;nbsp;&lt;/div&gt; &lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Tariffs and Trade Tensions&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;With the Trump administration signaling a return to protectionist trade measures, including the reintroduction of tariffs on key imports, global supply chains could face renewed disruption. While this creates headwinds for some sectors, it also presents opportunities for private capital to fund domestic infrastructure, manufacturing reshoring and supply chain modernization. Investors should be alert to how these dynamics may impact valuations, especially in sectors like industrials, logistics and technology hardware.&lt;/p&gt; &lt;br clear=&quot;all&quot; /&gt; &lt;div class=&quot;col-sm-3&quot; style=&quot;float: left;&quot;&gt; &lt;img alt=&quot;Bar chart icon with performance line above&quot; style=&quot;height:px; width:px;&quot; src=&quot;/-/media/images/global/icons/black-icons/regulatorywinds.svg&quot; /&gt;&lt;/div&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top:10px;&quot;&gt;&lt;strong&gt;Regulatory Winds&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;A more business-friendly regulatory tone under the Trump administration may favor private sector expansion, with looser rules and lower taxes possibly boosting M&amp;amp;A activity. For private equity, this could translate into increased deal flow and new opportunities in both the middle and large-cap markets. Globally, regulatory divergence continues, with varied risks and opportunities across Europe, Asia and the Middle East.&lt;/p&gt; &lt;br clear=&quot;all&quot; /&gt; &lt;div class=&quot;col-sm-3&quot; style=&quot;float: left;&quot;&gt; &lt;img alt=&quot;Federal or municipal building icon&quot; src=&quot;/-/media/images/global/icons/black-icons/needsecurity.svg?h=265&amp;amp;w=265&amp;amp;hash=E7A595ACAC2EF689F7D709D523B382C0&quot; style=&quot;width: 265px; height: 265px; margin-top: -15px;&quot; /&gt;&lt;/div&gt; &lt;div class=&quot;col-sm-9&quot; style=&quot;float: left;&quot;&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top:10px;&quot;&gt;&lt;strong&gt;Need for Security&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;Rising geopolitical instability and the growing reliance on digital infrastructure are leading to greater investment in cybersecurity, cloud resilience, and data sovereignty. Governments and corporations alike are prioritizing spending in this space, creating new avenues for private capital to fund innovation and infrastructure.&lt;/p&gt; &lt;/div&gt; &lt;br clear=&quot;all&quot; /&gt; &lt;div class=&quot;col-sm-3&quot; style=&quot;float: left;&quot;&gt; &lt;img alt=&quot;Federal or municipal building icon&quot; src=&quot;/-/media/images/global/icons/black-icons/alternativeliquiditysources.svg?h=265&amp;amp;w=265&amp;amp;hash=88C5285C7937F9EF41C0049474B72905&quot; style=&quot;width: 265px; height: 265px; margin-top: -15px;&quot; /&gt;&lt;/div&gt; &lt;div class=&quot;col-sm-9&quot; style=&quot;float: left;&quot;&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top:10px;&quot;&gt;&lt;strong&gt;Alternative Liquidity Sources&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;While IPO markets remain choppy, secondary transactions&amp;mdash;including GP-led continuation vehicles&amp;mdash;are gaining traction as viable exit paths. These mechanisms are critical in maintaining flexibility and liquidity for investors, particularly in a tighter capital-raising environment.&lt;/p&gt; &lt;/div&gt; &lt;br clear=&quot;all&quot; /&gt; &lt;hr /&gt; &lt;div class=&quot;col-sm-3&quot; style=&quot;float: left;&quot;&gt; &lt;img alt=&quot;Federal or municipal building icon&quot; src=&quot;/-/media/images/global/icons/black-icons/playbook.svg?h=265&amp;amp;w=265&amp;amp;hash=99803810B5D2388C75164FC1F7455645&quot; style=&quot;width: 265px; height: 265px; margin-top: -15px;&quot; /&gt;&lt;/div&gt; &lt;div class=&quot;col-sm-9&quot; style=&quot;float: left;&quot;&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;The Playbook&lt;/strong&gt;&lt;/p&gt; &lt;/div&gt; &lt;p class=&quot;delta&quot;&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;strong&gt;How can investors position themselves to take advantage of these opportunities? The answer is to consider a meaningful allocation to private investments across different segments.&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;br clear=&quot;all&quot; /&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Private equity&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;em&gt;We see more scrutiny on consolidation strategies and growing potential in non-U.S. markets.&lt;/em&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;&lt;strong&gt;U.S. market&lt;/strong&gt;: An increasingly pro-business climate in the U.S. will likely drive corporate activity. We believe taking a targeted approach focused on growth themes including reindustrialization, supply chain resilience and strategies at the intersection of government-private sectors, remains attractive.&lt;br /&gt; &lt;strong&gt;&lt;/strong&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;Artificial intelligence and automation&lt;/strong&gt;: The accessibility of AI, automation and new system integration tools should support consolidation strategies across service sectors, from autobody shops to accounting firms.&lt;/li&gt; &lt;li&gt;&lt;strong&gt;Global&lt;/strong&gt;: Outside of North America, we see potential in less traditional centers of private capital formation, including Japan, Asia-ex China and the Middle East. In Japan, 2025 should reveal whether corporate deal flow matches the private capital funding flows.&lt;/li&gt; &lt;/ul&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;/span&gt;&lt;img alt=&quot;Vic Leverett&quot; src=&quot;/-/media/images/global/headshots/h-q/leverett-vic.png?w=130&amp;amp;h=127&amp;amp;hash=54EF0E147D92514CD5CC0B883754504C&quot; style=&quot;height: 127px; width: 130px; margin-top: 20px; margin-right: 30px; margin-bottom: 20px; letter-spacing: -0.56px;&quot; /&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;em style=&quot;font-size: 18px; letter-spacing: -0.035em;&quot;&gt;&quot;With public markets shrinking, private equity buyouts provide investors access to a broader opportunity set, enhancing returns through operational improvements, strategic repositioning, and sector expertise.&quot;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;Vic Leverett&lt;/strong&gt;&lt;br /&gt; Managing Director, Head of Alternative Investments&lt;/p&gt; &lt;hr /&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Buyout Bounce Back&lt;br /&gt; &lt;/strong&gt;&lt;/p&gt; &lt;p&gt;European private equity buyouts have risen off their 2022 lows.&lt;/p&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;Invested capital by primary sector&lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;p&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/pe_319.webp&quot; target=&quot;_blank&quot;&gt;&lt;img alt=&quot;&quot; style=&quot;height:px; width:px;&quot; src=&quot;/-/media/images/global/blogs/images/pe_319.webp&quot; /&gt;&lt;/a&gt;&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;em&gt;Source: Pitchbook&lt;/em&gt;&lt;/p&gt; &lt;div class=&quot;col-sm-3&quot; style=&quot;float: left;&quot;&gt; &lt;img alt=&quot;Federal or municipal building icon&quot; src=&quot;/-/media/images/global/icons/black-icons/playbook.svg?h=265&amp;amp;w=265&amp;amp;hash=99803810B5D2388C75164FC1F7455645&quot; style=&quot;width: 265px; height: 265px; margin-top: -15px;&quot; /&gt;&lt;/div&gt; &lt;div class=&quot;col-sm-9&quot; style=&quot;float: left;&quot;&gt; &lt;/div&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;How to play it&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Private equity continues to attract investors seeking higher returns and broad diversification. It provides exposure to operational improvements and strategic repositioning of companies not presently in listed markets. Private equity also allows investors to emphasize emerging trends in their portfolios such as reindustrialization, the energy transition and AI.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Venture Capital&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;em&gt;AI will drive more productivity and fresh opportunities across industry and defense.&lt;/em&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;&lt;strong&gt;AI adoption&lt;/strong&gt;: AI will continue to move further into the mainstream with innovations such as AI agents and virtual collaborators. However, widespread acceptance also means growth is likely fully priced into financing rounds. As a result, we tend to favor earlier-stage investing.&lt;/li&gt; &lt;li&gt;&lt;strong&gt;Hardware and data ownership&lt;/strong&gt;: AI-driven code generation is changing the economics of software development, shifting the competitive advantage toward data and hardware. Technology breakthroughs are poised to make hardware more capital-efficient and investable. Governments are also prioritizing related sectors, pairing private sector capital with expanded sources of non-dilutive funding&amp;mdash;all of which will support a flurry of new companies.&lt;/li&gt; &lt;li&gt;&lt;strong&gt;Digitization&lt;/strong&gt;: The digitization of physical industries and the momentum in robotics, autonomous systems and defense technology will continue to unlock new innovations and revenue streams in these sectors. We maintain strong conviction in opportunities across cybersecurity, &quot;immersion&quot; themes, bio health, industrial automation and hard tech.&lt;/li&gt; &lt;/ul&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;/span&gt;&lt;img alt=&quot;Samuel Pittman, Ph.D.&quot; src=&quot;/-/media/images/global/headshots/h-q/pittman-samuel.webp?w=130&amp;amp;h=127&amp;amp;hash=5842C7C71AB979A7625AEE8E513407A4&quot; style=&quot;height: 127px; width: 130px; margin-top: 20px; margin-right: 30px; margin-bottom: 20px; letter-spacing: -0.56px;&quot; /&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top: -5px;&quot;&gt;&lt;em&gt;&quot;With companies staying private longer, venture capital broadens investor access to high-growth opportunities and complements small cap exposure in a shifting market landscape.&quot;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;Samuel Pittman, Ph.D.&lt;/strong&gt;&lt;br /&gt; Managing Director, Co-Head of Strategic Asset Allocation&lt;/p&gt; &lt;hr /&gt; &lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Higher Valuations&lt;br /&gt; &lt;/strong&gt;&lt;/p&gt; &lt;p&gt;Early-stage U.S. companies have seen valuations return to 2021 levels.&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;em&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/em&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;em&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;Median pre-money and median post-money valuations&lt;/span&gt;&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/venturecapital_319.webp&quot; target=&quot;_blank&quot;&gt;&lt;img alt=&quot;&quot; style=&quot;height:px; width:px;&quot; src=&quot;/-/media/images/global/blogs/images/venturecapital_319.webp&quot; /&gt;&lt;/a&gt;&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;em&gt;Source: Pitchbook&lt;/em&gt;&lt;/p&gt; &lt;div class=&quot;col-sm-3&quot; style=&quot;float: left;&quot;&gt; &lt;img alt=&quot;Federal or municipal building icon&quot; src=&quot;/-/media/images/global/icons/black-icons/playbook.svg?h=265&amp;amp;w=265&amp;amp;hash=99803810B5D2388C75164FC1F7455645&quot; style=&quot;width: 265px; height: 265px; margin-top: -15px;&quot; /&gt;&lt;/div&gt; &lt;div class=&quot;col-sm-9&quot; style=&quot;float: left;&quot;&gt; &lt;/div&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;How to play it&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;With the number of public market companies shrinking and private companies increasing, venture capital has become essential for accessing early-stage innovation. Allocating to venture capital not only provides exposure to these transformative companies early on but also helps investors maintain broad small-cap diversification.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Private Real Estate&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;em&gt;Private real estate is in a period of recovery, offering meaningful value in both listed and unlisted markets.&lt;/em&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;&lt;strong&gt;Relative value: &lt;/strong&gt;When listed and non-listed real estate assets are combined, the disparate characteristics can offer investors tangible relative value to trade mispriced securities and build or buy a broader array of property types across markets.&lt;/li&gt; &lt;li&gt;&lt;strong&gt;Market stabilization: &lt;/strong&gt;On a trailing three-year basis through year-end 2024, both listed and non-listed real estate underperformed equities by double digits. We expect this performance delta to narrow in upcoming vintages. With high volatility in rates, new construction has slowed meaningfully across sectors, allowing for occupancies to stabilize and rents to increase in existing assets.&amp;nbsp;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;Europe: &lt;/strong&gt;Rates may not moderate as expected, putting continued pressure on assets previously financed in less restrictive capital markets. We anticipate private core real estate valuations to bottom out this year while capital competes with nearly 8% yields available in areas such as investment-grade corporate mortgage-backed securities. As European markets are more heavily banked, with no real CMBS market, we think any bank retrenchment could still impact European equity values disproportionately, extending prospects for debt and non-core strategies.&lt;/li&gt; &lt;/ul&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;/span&gt;&lt;img alt=&quot;Amneet Singh&quot; src=&quot;/-/media/images/global/headshots/r-z/singh-amneet.png?w=130&amp;amp;h=127&amp;amp;hash=DE640820E15498B7B72360A235866950&quot; style=&quot;height: 127px; width: 130px; margin-top: 20px; margin-right: 30px; margin-bottom: 20px; letter-spacing: -0.56px;&quot; /&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top: -5px;&quot;&gt;&lt;em&gt;&quot;The current environment presents compelling entry points for long-term investors to gain access to the inflation-hedging properties of real estate in their portfolios..&quot;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;Amneet Singh&lt;/strong&gt;&lt;br /&gt; Director, Asset Allocation Strategy&lt;/p&gt; &lt;hr /&gt; &lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Transactions Rebound&lt;br /&gt; &lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;p&gt;North American private real estate transactions have ticked up over the past year.&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;em&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;Volume of transactions by sector&lt;/span&gt;&lt;/em&gt;&lt;/span&gt;&lt;strong&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;br /&gt; &lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/re319.webp&quot;&gt;&lt;img alt=&quot;&quot; style=&quot;height:px; width:px;&quot; src=&quot;/-/media/images/global/blogs/images/re319.webp&quot; /&gt;&lt;/a&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;em&gt;Source: MSCI Real Capital Analytics&lt;/em&gt;&lt;/p&gt; &lt;div class=&quot;col-sm-3&quot; style=&quot;float: left;&quot;&gt; &lt;img alt=&quot;Federal or municipal building icon&quot; src=&quot;/-/media/images/global/icons/black-icons/playbook.svg?h=265&amp;amp;w=265&amp;amp;hash=99803810B5D2388C75164FC1F7455645&quot; style=&quot;width: 265px; height: 265px; margin-top: -15px;&quot; /&gt;&lt;/div&gt; &lt;div class=&quot;col-sm-9&quot; style=&quot;float: left;&quot;&gt; &lt;/div&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;How to play it&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Rental income from real estate typically keeps pace with inflation over the long term, making it an essential asset class today. While office real estate remains stressed post-COVID, sectors like logistics and data centers are well-positioned to benefit from AI-driven demand. Real estate is an essential exposure in a total portfolio solution.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Private Infrastructure&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;em&gt;Private infrastructure is positioned for growth, driven by inflation-linked cash flows and demand in digital and energy sectors, with risks from oversupply and geopolitics.&lt;/em&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;&lt;strong&gt;Energy infrastructure&lt;/strong&gt;: Most cash flows associated with private infrastructure have inflation linkages, a feature we see continuing to draw investor attention. The energy transition continues to encompass one of the most important areas for private capital mobilization.&lt;/li&gt; &lt;li&gt;&lt;strong&gt;AI infrastructure&lt;/strong&gt;: With the advent of AI, acute deficits in the supply of both power and water to meet demand will need to be addressed. Data center demand is also high; although, it&#39;s worth noting the potential for a supply overhang at some point is not low. This will make general partner skill and manager selection more vital.&lt;/li&gt; &lt;li&gt;&lt;strong&gt;Geopolitics&lt;/strong&gt;: For Europe, the push to stay competitive could lead to outsourcing a large portion of the AI tech stack to more energy-abundant regions. In addition, the path of the energy transition in Europe and a potential resumption of energy flows from Russia could also influence infrastructure investment.&lt;/li&gt; &lt;/ul&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;/span&gt;&lt;img alt=&quot;Pierre Dongo-Soria, CFA&quot; src=&quot;/-/media/images/global/headshots/a-g/dongo-soria-pierre.png?w=130&amp;amp;h=127&amp;amp;hash=90F7BEA91606CBFC7A797667A0A702C8&quot; style=&quot;height: 127px; width: 130px; margin-top: 20px; margin-right: 30px; margin-bottom: 20px; letter-spacing: -0.56px;&quot; /&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top: -5px;&quot;&gt;&lt;em&gt;&quot;Infrastructure is at the heart of global transformation, offering stability, opportunity, and resilience in a shifting landscape.&quot;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;Pierre Dongo-Soria, CFA&lt;/strong&gt;&lt;br /&gt; Principal Asset Allocation Strategist&lt;/p&gt; &lt;hr /&gt; &lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Rise in Renewables&lt;br /&gt; &lt;/strong&gt;&lt;/p&gt; &lt;p&gt;Renewables make up an increasing share of power generation in North America.&lt;/p&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;Power generation by fuel source in North America, as a percentage of total power generated&lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;p&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/infra319.webp&quot;&gt;&lt;img alt=&quot;&quot; style=&quot;height:px; width:px;&quot; src=&quot;/-/media/images/global/blogs/images/infra319.webp&quot; /&gt;&lt;/a&gt;&lt;/p&gt; &lt;div class=&quot;col-sm-3&quot; style=&quot;float: left;&quot;&gt; &lt;img alt=&quot;Federal or municipal building icon&quot; src=&quot;/-/media/images/global/icons/black-icons/playbook.svg?h=265&amp;amp;w=265&amp;amp;hash=99803810B5D2388C75164FC1F7455645&quot; style=&quot;width: 265px; height: 265px; margin-top: -15px;&quot; /&gt;&lt;/div&gt; &lt;div class=&quot;col-sm-9&quot; style=&quot;float: left;&quot;&gt; &lt;/div&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;How to play it&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The energy transition and the build-out of AI models are driving massive infrastructure investments that will add to mature infrastructure segments like ports and communication networks. Infrastructure, with its inflation-hedging properties and its importance to the global economy, is a natural choice for a strategic allocation.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Private credit&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;em&gt;Senior secured lending and asset-backed strategies thrive in private credit, with evergreen funds offering flexibility.&lt;/em&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;&lt;strong&gt;Senior secured lending&lt;/strong&gt;: Senior secured lending, which has first claim on cash flows, is preferred for both corporate and real assets. Since much of the private credit market is floating rate, elevated base rates mean lenders will continue to absorb more cash flow. Elevated financing costs start to place more pressure on junior facilities and lower-quality sponsor-backed borrowers.&lt;/li&gt; &lt;li&gt;&lt;strong&gt;Asset-based lending&lt;/strong&gt;: Lending against specific assets (asset-backed and asset-based) is preferred to lending on broader enterprise operating income or EBITDA (cash flow lending). As the need for capital expenditure grows, we think more innovation is coming to fund assets in non-bank markets.&lt;/li&gt; &lt;li&gt;&lt;strong&gt;Evergreen vehicles&lt;/strong&gt;: With uncertainty over the path of rates, we see funds just beginning their investment cycle (early in lock-up periods), with fresh capital having more flexibility and a strategic deployment advantage in upcoming vintages. While these structures offer greater liquidity, they are not meant to house longer duration non-performing or distressed strategies. Should the non-bank lending market be tested by an extended period of defaults, closed-end credit specialists and an active secondary market will be available to provide solutions. Therefore, diversification by strategy and outperformance tied to manager selection is essential.&lt;/li&gt; &lt;/ul&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;/span&gt;&lt;img alt=&quot;Keith Brakebill, CFA&quot; src=&quot;/-/media/images/global/headshots/a-g/brakebill-keith.png?w=130&amp;amp;h=127&amp;amp;hash=AE4F206E92B2B285E1671D811F92AF18&quot; style=&quot;height: 127px; width: 130px; margin-top: 20px; margin-right: 30px; margin-bottom: 20px; letter-spacing: -0.56px;&quot; /&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top: -5px;&quot;&gt;&lt;em&gt;&quot;Private credit has generated strong investment returns on par with equity, albeit with much lower volatility, making it an important slice in an efficient portfolio.&quot;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;Keith Brakebill, CFA&lt;/strong&gt;&lt;br /&gt; Director, Senior Portfolio Manager, Fixed Income&lt;/p&gt; &lt;hr /&gt; &lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Size Matters&lt;br /&gt; &lt;/strong&gt;&lt;/p&gt; &lt;p&gt;Medium-sized funds are most common&lt;/p&gt; &lt;p&gt;&lt;em style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;/em&gt;&lt;em style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;Private debt funds by fund size, as a percentage of total funds&lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/prcredit319.webp&quot;&gt;&lt;img alt=&quot;&quot; style=&quot;height:px; width:px;&quot; src=&quot;/-/media/images/global/blogs/images/prcredit319.webp&quot; /&gt;&lt;/a&gt; &lt;/p&gt; &lt;div class=&quot;col-sm-3&quot; style=&quot;float: left;&quot;&gt; &lt;img alt=&quot;Federal or municipal building icon&quot; src=&quot;/-/media/images/global/icons/black-icons/playbook.svg?h=265&amp;amp;w=265&amp;amp;hash=99803810B5D2388C75164FC1F7455645&quot; style=&quot;width: 265px; height: 265px; margin-top: -15px;&quot; /&gt;&lt;/div&gt; &lt;div class=&quot;col-sm-9&quot; style=&quot;float: left;&quot;&gt; &lt;/div&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;How to play it&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The private credit market is growing rapidly, to where it is now a substantial portion of sub-investment-grade lending. A diversified strategic asset allocation that includes sub-investment-grade fixed income should augment listed high-yield bonds and bank loans with private debt.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;In the months ahead, we believe private markets will be redefined by a changing regulatory backdrop, new security requirements and fluctuating liquidity dynamics. This should create a host of new opportunities, albeit with heightened complexities. By deploying every tool in the playbook, investors can capture high-growth opportunities and unlock value across emerging sectors and regions, fueling breakthroughs that shape the future. To wit, the resurgence in private markets is already underway.&lt;/p&gt; &lt;p&gt;To learn more about private market opportunities at Russell Investments, visit our &lt;a href=&quot;/uk/solutions/institutions/funds-and-strategies/alternative-investing-strategies/private-markets&quot;&gt;private markets research page&lt;/a&gt;.&lt;/p&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt; &lt;p style=&quot;margin-bottom: 1.125rem;&quot;&gt;&amp;nbsp;&lt;/p&gt;Private Markets Team<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {7E85401E-1E6C-40DC-9AA9-2872C30467DD}https://russellinvestments.com/uk/blog/giant-step-in-us-china-tariffA major rollback in tariffs between the U.S. and China has markets smiling, but recession risks are still likely to remain elevated, BeiChen Lin writes. Mon, 12 May 2025 00:00:00 -0700&lt;p&gt;&lt;span&gt;The Chinese scholar Lao Tzu wrote that &amp;ldquo;the journey of 1,000 miles begins with a single step.&amp;rdquo; Today, the United States and China took a giant step toward restoring and revamping their trade relationship.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Yelling &amp;ldquo;cut&amp;rdquo;&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;China and the U.S. conducted their first formal trade talks of 2025 over the weekend. And on Monday, May 12, they announced the outcome of their negotiations. The U.S. has agreed to roll back the tariff increase on Chinese goods from 145% to 30%, with China lowering its counter-tariffs to 10% from 125% for 90 days beginning May 14.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;This agreement was a substantial announcement, as it effectively cuts the overall tariff applied to U.S. imports by around 10%. In turn, this move could reduce the projected one-time hit to U.S. inflation by a percentage point.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;In addition, the two countries agreed to continue further discussions aimed at reducing the size of the U.S. trade deficit and addressing other trade-related challenges.&amp;nbsp;&lt;br /&gt; Market fireworks&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;In response to the tariff announcement, markets appeared to be in a celebratory mood. As of roughly 10:00 a.m. Eastern time this morning:&lt;/span&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;&lt;span&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;S&amp;amp;P 500 futures up 2.6%&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp;&lt;/span&gt;Crude oil up 3.2%&lt;/li&gt; &lt;li&gt;Gold down 2.9%&lt;/li&gt; &lt;li&gt;U.S. 10-year Treasury yield up 7 basis points&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;1000-mile journey&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Although today&amp;rsquo;s action was an important step, it may only be one of many in the thousand-mile economic journey. Even with today&amp;rsquo;s tariff relief, the U.S. has still seen the largest increase in effective tariff rates in many decades (remember that a baseline 10% tariff against many other trade partners is still in effect). Moreover, the trade developments with China and other nations could still have many twists and turns. We cannot completely rule out the risk of tariffs coming back after the pause expires. In fact, the first trade war between the U.S. and China had several tariff hikes, reductions and more hikes before the final signing of the &amp;ldquo;Phase One&amp;rdquo; deal.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Right now, we continue to believe that economic uncertainty remains elevated. Prior to today&amp;rsquo;s announcement, we assessed that the risk of the U.S. economy tipping into recession over the next year was 40%. With today&amp;rsquo;s encouraging news, we may lower that risk estimate in the days to come. But even with a reduction in recession risk, it&amp;rsquo;s likely that recession risk will remain above the 15% to 20% norm for some time. Against this backdrop, we continue to stress the power of building diversified and robust portfolios and sticking to long-term goals.&amp;nbsp;&lt;br /&gt; &lt;/span&gt;&lt;/p&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;style&gt; &lt;/style&gt;BeiChen Lin<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {ACD6943B-5223-4CEC-BCAF-8D430299BB59}https://russellinvestments.com/uk/blog/overlays-rocky-marketsOur senior director of overlay services details five ways overlays can help investors better navigate market turbulence. Mon, 12 May 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;During volatile markets, an overlay can make for a more comfortable investing experience&lt;/li&gt; &lt;li&gt;Key benefits of an overlay include liquidity management, dynamic allocation, risk management, cost efficiency and oversight and discipline&lt;/li&gt; &lt;li&gt;An overlay specialist that&amp;rsquo;s also an OCIO can provide additional value because they&amp;rsquo;ll have total visibility into your portfolio&amp;nbsp;&lt;br /&gt; &lt;div&gt;&amp;nbsp;&lt;/div&gt; &lt;/li&gt; &lt;/ul&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;When volatility ripped through markets last month, many investors scrambled to respond. Some wanted to quickly adjust specific security exposures. Others wanted to flee to cash or build in protection against additional downside moves. And some rushed to buy the dip.&amp;nbsp;&lt;br /&gt; &lt;br /&gt; At Russell Investments, we didn&amp;rsquo;t freak out&amp;mdash;and neither did our overlay clients. Why? Because our comprehensive overlay services program made these types of requests easily achievable.&amp;nbsp;&amp;nbsp;&lt;br /&gt; &lt;br /&gt; While the worst of the short-term volatility has faded, markets could easily turn on a dime again. Having an overlay in place the next time things sour could make for a much more comfortable investing experience. Here are five reasons to consider partnering with an overlay specialist before volatility strikes again.&amp;nbsp;&amp;nbsp;&lt;br /&gt; &lt;br /&gt; &lt;span style=&quot;font-size: 24px;&quot;&gt; &lt;strong&gt;1. Liquidity Management&amp;nbsp;&lt;/strong&gt;&lt;/span&gt;&lt;br /&gt; &lt;br /&gt; In times of crisis, liquidity becomes paramount. In other words, cash is king. An overlay program allows investors to maintain full market exposure (beta) while holding a higher percentage of their portfolio in cash or highly liquid assets. Since derivatives are capital efficient instruments, only a small portion of cash is needed to obtain market exposure, making it one of the quickest ways to boost a portfolio&amp;rsquo;s liquidity profile. Furthermore, when volatility spikes, trading volumes tend to increase but liquidity (how much you can execute quickly) gets worse. This phenomenon is much more pronounced for physical assets, making derivatives the preferred instrument during market turbulence.&amp;nbsp;&amp;nbsp;&lt;br /&gt; &lt;br /&gt; &lt;em&gt;&lt;strong&gt;Key Benefits:&amp;nbsp;&lt;/strong&gt;&lt;/em&gt;&lt;/p&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Hold more cash for liquidity purposes without experiencing cash drag.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Capital efficient derivatives are unfunded instruments that require less cash.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Derivatives tend to be more liquid than physicals, especially in stressed market conditions.&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;&lt;em&gt;Example:&lt;/em&gt;&lt;/strong&gt; &lt;/p&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Redeeming from an overweight fixed income passive manager and replacing exposure synthetically via a total return swap to free up cash without altering the portfolio&amp;rsquo;s risk/return profile.&amp;nbsp;&lt;br /&gt; &lt;br /&gt; &lt;span style=&quot;font-size: 24px;&quot;&gt; &lt;strong&gt;2. Dynamic Allocation&amp;nbsp;&lt;/strong&gt;&lt;/span&gt;&lt;br /&gt; &lt;br /&gt; Overlay programs provide a fast and flexible mechanism to implement tactical views or adjust portfolio targets. This is crucial when market dislocations create short-term opportunities. Derivatives can be used to express these tilts immediately, without waiting on slower-moving physical asset trading.&amp;nbsp;&lt;br /&gt; &lt;br /&gt; &lt;em&gt;&lt;strong&gt;Key Benefits:&lt;/strong&gt;&lt;/em&gt;&amp;nbsp;&lt;/p&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Take advantage of tactical opportunities quickly and efficiently.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Execute trades outside normal market hours with liquid futures contracts.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Avoid coordination delays across multiple managers.&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;&lt;em&gt;&lt;strong&gt;Example:&lt;/strong&gt;&lt;/em&gt;&lt;/p&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;A client sees equities as oversold and wants to increase exposure intraday. An overlay can buy equity index futures within minutes.&amp;nbsp;&lt;br /&gt; &lt;br /&gt; &lt;strong&gt;&lt;em&gt;3. Risk Management&amp;nbsp;&lt;/em&gt;&lt;/strong&gt;&lt;br /&gt; &lt;br /&gt; Even though risk tolerance levels vary for each client, an overlay program tends to be the go-to tool for expressing it. As markets sold off in April, investors who were more risk averse used the overlay program to place hedges to protect their portfolio against further declines. At the same time, investors who were less worried about falling equity prices and more concerned about not fully capturing the upside potential of a recovery, used the overlay to mitigate that risk.&amp;nbsp;&lt;br /&gt; &lt;br /&gt; Another type of risk is asset drift relative to the strategic asset allocation (SAA). Policy implementation overlays help ensure portfolios stay aligned with the SAA and reduce unintended drift, especially when physical asset values move quickly or unpredictably. Historically, this kind of discipline has added value during times of crisis when emotions are running high. For overlay mandates that are more client-directed in nature, using derivatives is the quickest way to rebalance a portfolio.&amp;nbsp;&lt;br /&gt; &lt;br /&gt; &lt;em&gt;&lt;strong&gt;Key Benefits:&amp;nbsp;&lt;/strong&gt;&lt;/em&gt;&lt;br /&gt; &lt;br /&gt; &lt;/p&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Keep the portfolio close to target allocations, reducing tracking error.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Avoid unintentional risk from exposure drifts during volatile periods.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Add downside protection via options, short futures, or Treasury exposure.&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;&lt;em&gt;&lt;/em&gt;&lt;strong&gt;&lt;em&gt;Example&lt;/em&gt;&lt;/strong&gt;: &lt;/p&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;During a sharp equity market decline, the overlay can immediately reduce the portfolio&amp;rsquo;s equity risk using short equity futures or option hedges.&amp;nbsp;&lt;br /&gt; &lt;br /&gt; &lt;span style=&quot;font-size: 24px;&quot;&gt; &lt;strong&gt;4. Cost Efficiency&amp;nbsp;&lt;/strong&gt;&lt;/span&gt;&lt;br /&gt; &lt;br /&gt; Compared to trading physical securities, derivatives are significantly cheaper in terms of transaction costs and operational friction. These differences become even more pronounced when volatility increases and bid/ask spreads widen. Overlay programs can reduce portfolio turnover by handling exposure adjustments synthetically rather than through manager redemptions or reallocations.&amp;nbsp;&lt;br /&gt; &lt;br /&gt; &lt;em&gt;&lt;strong&gt;Key Benefits:&amp;nbsp;&lt;/strong&gt;&lt;/em&gt;&lt;/p&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Estimated to cost roughly one-eighth of what it takes to trade physical assets.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Minimize portfolio turnover and disruption on physical managers.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Use derivatives to &amp;ldquo;top up&amp;rdquo; or &amp;ldquo;trim&amp;rdquo; exposures rather than adjusting physical portfolios.&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;&lt;em&gt;&lt;strong&gt;Example:&lt;/strong&gt;&lt;/em&gt; &lt;/p&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;As a portfolio became underweight equities, instead of allocating cash to a physical equity manager, a client uses the overlay program to increase equity exposure via futures. This is cheaper, faster and less disruptive.&amp;nbsp;&lt;br /&gt; &lt;br /&gt; &lt;span style=&quot;font-size: 24px;&quot;&gt; &lt;strong&gt;5. Oversight and Discipline&amp;nbsp;&lt;/strong&gt;&lt;/span&gt;&lt;br /&gt; &lt;br /&gt; An overlay provides a centralized and transparent view of total portfolio exposures&amp;mdash;including physical and synthetic components. Typically, this includes daily oversight and monitoring of all portfolio account values and known cash flows. This helps investment committees and boards make timely and informed decisions, particularly during periods of stress when emotions can cloud judgment.&amp;nbsp;&lt;br /&gt; &lt;br /&gt; &lt;strong&gt;&lt;em&gt;Key Benefits:&lt;/em&gt;&lt;/strong&gt;&amp;nbsp;&lt;/p&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Real-time exposure tracking relative to targets.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Clear governance structure with predefined rebalancing rules.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Supports decision-making with data and structure, reducing behavioral bias.&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;&lt;em&gt;&lt;strong&gt;Example:&lt;/strong&gt;&lt;/em&gt; &lt;/p&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;During a crisis, an institutional investor can avoid panic selling by relying on clear guidelines implemented via an overlay program to methodically rebalance and maintain discipline.&amp;nbsp;&lt;br /&gt; &lt;br /&gt; &lt;span style=&quot;font-size: 24px;&quot;&gt; &lt;strong&gt;One more thing&amp;nbsp;&lt;/strong&gt;&lt;/span&gt;&lt;br /&gt; &lt;br /&gt; From my standpoint, there&amp;rsquo;s additional value in partnering with an overlay provider that&amp;rsquo;s also an OCIO (outsourced chief investment officer). This is because the best OCIO providers act as an extension of your staff, meaning they&amp;rsquo;ll already be working closely with your team. During times of crisis, these providers will have a total view of your portfolio, visibility to upcoming cash flows and portfolio changes, implementation expertise, and insight into your overall liquidity/spending needs. With visibility to daily portfolio changes, they can provide the reporting needed to allow you to make quick and informed decisions.&amp;nbsp;&lt;br /&gt; &lt;br /&gt; Consider reaching out to an investment solutions firm with overlay expertise so that you&amp;rsquo;re better equipped for the next round of volatility. Because when the going gets rough, the overlay gets going&lt;span&gt;.&amp;nbsp;&lt;br /&gt; &lt;/span&gt;&lt;/p&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;style&gt; &lt;/style&gt;Alexander Cousley<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {74BBC41E-AA71-4922-9E0F-8A076A1BEEE4}https://russellinvestments.com/uk/blog/trade-tone-market-rally-mwir<p><strong><span>Key takeaways:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>The U.S. and UK reached a trade deal</span></li> <li><span>The Fed is facing a Catch-22</span></li> <li><span>The Bank of England cut rates again</span></li> </ul>Fri, 09 May 2025 02:18:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key Takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;&lt;span&gt;The U.S. and UK reached a trade deal&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;The Fed is facing a Catch-22&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;The Bank of England cut rates again&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Senior Director and Chief Investment Strategist for North America, Paul Eitelman, shared recent trade policy developments. He also reviewed the latest decisions on rates from the U.S. Federal Reserve (Fed) and the Bank of England (BOE).&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Progress report&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Eitelman started by noting the U.S. and the UK reached a trade agreement Thursday—the first deal struck since President Trump’s &lt;a href=&quot;https://russellinvestments.com/uk/blog/tariff-day&quot;&gt;April 2 “Liberation Day” announcement&lt;/a&gt;. He characterized the agreement as a positive step toward lowering global trade tensions, but noted the deal is limited in scope. In addition, the UK already had the lowest reciprocal tariff rate among other countries, and the 10% baseline rate imposed by the U.S. last month will remain in place.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; Meanwhile, the U.S. and China agreed to open trade talks this weekend in Switzerland. In an encouraging sign, Trump implied the United States’ 145% tariff rate on Chinese imports will likely be lowered, and said he expects the meeting to be friendly.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Eitelman said the softer tone from the U.S. on &lt;a href=&quot;https://russellinvestments.com/uk/insights/managing-market-volatility&quot;&gt;trade policy&lt;/a&gt; has helped boost market sentiment in recent weeks. “In another example of &lt;a href=&quot;https://russellinvestments.com/uk/blog/markets-fast-lane&quot;&gt;how fast markets move these days&lt;/a&gt;, U.S. stocks have fully erased their post-April 2 declines. This is why we continue to stress the importance of &lt;a href=&quot;https://russellinvestments.com/uk/blog/Thinking-about-market-timing-today&quot;&gt;staying invested during volatile times&lt;/a&gt;,” he stated.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;The Fed&#39;s Catch-22&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Pivoting to monetary policy, Eitelman noted the Fed left interest rates unchanged this week, citing extreme uncertainty over the Trump administration’s trade policy. “Chair Jerome Powell mentioned ‘uncertainty’ seven times in the press conference and the words ‘don’t know’ eight times. This underscores the challenges of forecasting in today’s macroeconomic environment,” he remarked.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;The tariffs are likely to nudge the U.S. economy toward a &lt;a href=&quot;https://russellinvestments.com/uk/blog/stagflation-lite-fed-growth-outlook&quot;&gt;stagflationary environment&lt;/a&gt; of weaker growth and higher inflation, Eitelman noted. “This puts the Fed in a &lt;a href=&quot;https://russellinvestments.com/uk/blog/pick-your-poison-higher-inflation-slower-growth&quot;&gt;Catch-22 situation&lt;/a&gt; when it comes to adjusting monetary policy. Raising rates would bring inflation down but cause growth to slow, while cutting rates would stimulate the economy but lead to a rise in inflation,” he explained.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;In the short term, the Fed is comfortable staying on hold and monitoring how trade policy and economic data evolve before acting, Eitelman said.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Another cut&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;The BOE, meanwhile, opted to lower rates by 0.25% on Thursday. Eitelman said the decision was split, with five of nine members voting for the cut.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; “In their statement, BOE members noted they see heightened uncertainty due to trade policies as well as some downside risks to growth,” he said. Because tariffs don’t increase the inflation risk for non-U.S. economies, it’s easier for a country like the UK to cut rates when growth slows, Eitelman added.&lt;/span&gt;&lt;/p&gt; Paul Eitelman<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {319DA5D4-F8E6-4B4F-A489-CA368978E83C}https://russellinvestments.com/uk/blog/first-trade-deal-signals-hopeMarkets have reacted positively to the U.S.-UK trade deal, but is this enthusiasm likely to fade?Fri, 09 May 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;For Britain, the trade deal takes the edge off the high tariffs on cars, steel, and aluminium, but the 10% reciprocal tariff rates on other goods are still in place.&lt;/li&gt; &lt;li&gt;Financial markets liked the fact that a deal was done. U.S stocks rose initially, but have since faded.&amp;nbsp;&lt;/li&gt; &lt;li&gt;Much harder negotiations with other countries lie ahead for the Trump administration.&lt;br /&gt; &lt;div&gt;&amp;nbsp;&lt;/div&gt; &lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;President Trump&amp;rsquo;s deal season has kicked off with the United Kingdom (UK) on May 8 becoming the first country to nail down a trade agreement with the United States (U.S.), since the start of his second term.&lt;/p&gt; &lt;p&gt;Steel, autos and beef were on the agenda, with the rest of the world watching for any clues on how future deals may unfold.&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Art of the Deal&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;To the disappointment of many, the reciprocal 10% tariff rate, initially outlined by President Trump on April 2, remains in place.&amp;nbsp;&lt;/p&gt; &lt;p&gt;Moreover, Trump has indicated that this would likely be the lower bound tariff threshold, which dampens optimism for other trade talks.&amp;nbsp;&lt;/p&gt; &lt;p&gt;This adds to the likelihood that tariff rates are likely to stay at their highest level since at least the 1940&amp;rsquo;s, even if deals with other countries are made.&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Tariff Relief&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;Still, there was some relief for the UK, with the two countries agreeing that up to 100,000 vehicles annually could be exported from the UK to the U.S., subject to a 10% tariff rate rather than the 27.5% rate previously in effect.&amp;nbsp;&lt;/p&gt; &lt;p&gt;For context, UK car exports to the U.S. were valued at &amp;pound;6.7 billion in 2024, representing 26 percent of total car exports. This made the U.S. the largest export market for Britain&amp;rsquo;s automotive industry and highlights the significance of the tariff relief.&lt;/p&gt; &lt;p&gt;However, while the UK announced that steel and aluminium tariffs will be cut to zero from 25%, the White House merely stated that the two countries &amp;ldquo;will negotiate an alternative arrangement&amp;rdquo;, leaving some doubt on the issue.&amp;nbsp;&lt;/p&gt; &lt;p&gt;This is a meaningful concession, as steel production remains an important issue for UK Prime Minister, Keir Starmer. In 2024, the UK exported &amp;pound;370 million worth of steel and &amp;pound;225 million worth of aluminium to the U.S., accounting for 9 percent of total steel exports and 7 percent of aluminium exports respectively.&lt;/p&gt; &lt;p&gt;From a U.S. perspective, the trade agreement broadens the access of U.S. agricultural products to the UK, potentially generating $5 billion in new export opportunities for American products, including beef and ethanol.&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Instant Assessment&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;Financial markets liked the fact that a deal was done. U.S. stocks rose strongly at first, with the S&amp;amp;P 500 up about 1.5% at one point but fading later to close 0.6% higher. Meanwhile, the dollar rose 0.7% against the euro and 0.2% against the pound. However, the U.S. dollar is still down sharply since Trump&#39;s inauguration.&lt;/p&gt; &lt;p&gt;The deal between the U.S. and UK is not a comprehensive free trade agreement, but one that was hammered out quickly in response to the tariffs imposed by the Trump administration (including the &amp;ldquo;Liberation Day&amp;rdquo; tariffs). In simple terms, Britain exchanged the ability to export (mostly high-end) cars at 10% tariffs for easier access of American beef and ethanol.&amp;nbsp;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;The Other Deals&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;Much harder negotiations with other countries lie ahead for the Trump administration. Talks with China and the European Union will be the key ones to watch.&amp;nbsp;&lt;/p&gt; &lt;p&gt;Finding common ground with the UK was always going to be easier than with other countries since the reciprocal tariff rate on Britain was at the lowest level of 10% to start with. While the announcements by the American and British governments were welcomed by markets, the devil will be in the detail and the positive economic impact is marginal.&amp;nbsp;&lt;/p&gt; &lt;p&gt;For Britain, the deal takes the edge off the high sectoral tariffs (27.5% and 25%) on cars, steel, and aluminium, but the 10% reciprocal tariff rates are still in place. Investors may be disappointed after the initial enthusiasm fades.&lt;/p&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;style&gt; &lt;/style&gt;Van Luu<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {23D3150B-CF4A-4FC0-BC77-F9271FC9BE31}https://russellinvestments.com/uk/blog/what-makes-a-successful-tm-event<span style="line-height: 107%;">We explore the key pillars of successful transition management, including strategic alignment, confidentiality, cost efficiency and adaptability.</span> <style> </style> <style> </style> <style> </style>Fri, 09 May 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;Effective transition management relies on a clear, client-focused strategy that minimises risks, safeguards confidentiality, and preserves portfolio value.&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;Transparent governance and proactive communication build client trust by ensuring robust risk management and real-time updates throughout the transition process.&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;Cost minimisation and adaptability are essential for achieving client objectives, leveraging efficient execution and flexibility to navigate market changes.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;Many things in life are easier said than done and this is no truer than in transitioning an investment portfolio. When done effectively, it can preserve capital, enhance performance, and strengthen client relationships. However, achieving these results can be difficult and requires expertise, strategic planning, and flawless execution to minimise cost, risk, and market impact.&lt;/p&gt; &lt;p&gt;In this article we explore the core pillars of effective transition management that, from our experience, contribute to successful portfolio transitions.&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Having a Clear Strategy&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;div&gt;A well-defined, client-aligned strategy is essential in transition management. This means working closely with all stakeholders at the pre-transition stage, targeting key risk factors such as security, regional, currency or duration risk, and how to minimise them. From a market impact perspective, having a strategy in place to disguise the size of large orders, as well as leveraging a passive approach at different stages of the transition, is key to delivering a transition within the predefined cost estimate range, while protecting the value of the portfolio.&lt;/div&gt; &lt;div&gt;&amp;nbsp;&lt;/div&gt; &lt;div&gt;&lt;strong style=&quot;font-size: x-large; letter-spacing: -0.035em;&quot;&gt;Confidentiality&lt;/strong&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;&lt;/span&gt;&lt;/strong&gt;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;For any event, it is pivotal to minimise information leakage that could result in lost performance. This starts first and foremost with your choice of transition manager and ensuring their structure and approach is fully aligned with your goals. We have also found that by utilising a wide range of trading venues or counterparties, with no bias toward using one over another, helps to prevent a specific party from being able to discern the overall size and scope of the trading taking place during a transition.&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;strong style=&quot;letter-spacing: -0.035em; font-size: x-large;&quot;&gt;Proactive Communication&lt;/strong&gt;&lt;/div&gt; &lt;div&gt;&lt;strong style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;&lt;/span&gt;&lt;/strong&gt;&lt;/div&gt; &lt;div&gt;&lt;strong style=&quot;letter-spacing: -0.035em; font-size: x-large;&quot;&gt;&lt;/strong&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Effective transition management also requires consistent and transparent communication. The level of communication can vary from client-to-client and often needs to be customised for each specific event. That said, keeping clients informed with regular updates allows them to monitor the transition closely, fostering confidence and minimising surprises. Transparent reporting can transform a complex transition event into a manageable process, as clients gain real-time insights that reinforce governance and oversight. Proactive communication builds trust, as it shows a commitment to accountability and responsiveness&amp;mdash;two essential components for successful transitions.&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 24px;&quot;&gt;&lt;strong&gt;Adaptability&lt;/strong&gt;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;In real-time markets, adaptability is often required. Transition managers must be prepared to handle last-minute client requests or shifts in market conditions. By rapidly adjusting strategies transition managers can keep projects within defined cost and risk parameters. This flexibility ensures that the client&amp;rsquo;s objectives are met without compromising the performance or integrity of the transition. It&amp;rsquo;s important to note that this adaptability must work in conjunction with the agreed communication strategy. E.g. should a global conflict arise around the time of the transition, or indeed during it, there would be few clients that would not expect to be consulted as to the potential impact, rather than the transition manager acting unilaterally.&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 24px;&quot;&gt;&lt;strong&gt;Governance&lt;/strong&gt;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Having a robust and transparent risk management and governance process is another cornerstone of effective transition management. Clients need to trust that their assets are being handled with the appropriate due diligence, which includes protecting against information leakage and managing exposure. Having a clear, communicable governance structure in place not only reduces operational risks but also reinforces client confidence. At the heart of this will be the reporting that is agreed with the client. As standard the client should expect pre-transition analysis, updates during the transition and a post transition report, but there may well be additional requirements that the client has, and these should be agreed prior to the event.&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;strong&gt;&lt;/strong&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;strong&gt;Minimising Cost&amp;nbsp;&lt;/strong&gt;&lt;/span&gt;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Lastly, but by no means least, is cost. Cost minimisation often defines the success of a transition. One of the ways we achieve this at Russell Investments is by employing a multi-venue trading approach that reduces market impact when trading equities while also optimising trade execution. For example, off-exchange trading minimises spread and market impact costs which directly benefits the client&amp;rsquo;s bottom line and puts dealers in direct competition - especially in over the counter markets such as fixed income and foreign exchange - that reduce spread costs. When implementation shortfall is within or even below pre-transition estimates, clients see clear value in the manager&amp;rsquo;s disciplined approach to trading.&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;strong style=&quot;font-size: x-large; letter-spacing: -0.035em;&quot;&gt;The bottom line&lt;/strong&gt;&lt;/div&gt; &lt;div&gt;&lt;strong style=&quot;font-size: x-large; letter-spacing: -0.035em;&quot;&gt;&lt;/strong&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Ultimately, an effective transition manager understands that they are not just transitioning a portfolio; they are building a relationship with a client. And like any relationship, to be successful requires trust, clear communication, and an ability to adapt to the needs of the other. At Russell Investment we pride ourselves on these qualities and understand that when considering a portfolio shift, it is never too early to start a conversation and discuss your options.&lt;/span&gt;&lt;/div&gt; &lt;p&gt;[promobox]&lt;/p&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.&lt;/p&gt; &lt;p style=&quot;margin-bottom: 1.125rem;&quot;&gt;&amp;nbsp;&lt;/p&gt;Chris AdolphTravis Bagley<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {B9FFD8E2-DE77-42FC-9B40-BCEE9A5450CC}https://russellinvestments.com/uk/blog/tariff-risks-reshape-manager-positioningLearn where specialist managers see opportunities and risks amid tariff uncertainty.Tue, 06 May 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;MAY 2025 ACTIVE MANAGEMENT INSIGHTS&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;Tariff uncertainty is driving defensive equity shifts&lt;/li&gt; &lt;li&gt;AI outlooks are evolving amid increased competition&lt;/li&gt; &lt;li&gt;China sentiment is improving&lt;/li&gt; &lt;li&gt;U.S. M&amp;amp;A activity has stalled&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;5 Key Macro Trends&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;1. Tariffs are driving equity managers&amp;rsquo; defensive posture&lt;/strong&gt;&lt;br /&gt; &lt;br /&gt; After entering the year with a cautious outlook, managers have become more defensively postured as the U.S. tariff policy has increased uncertainty. Global managers have been reducing exposure to the U.S. and rotating toward emerging markets. Within the U.S., equity investors are focusing on companies with stable business models and limited exposure to international trade. Managers observe that many companies are delaying spending and investing decisions until there is greater clarity regarding U.S. tariffs.&lt;br /&gt; &lt;br /&gt; Outside the U.S., managers in other developed markets are looking to own more domestically focused companies. Most notably, equity investors in Europe and Japan have cited a favorable opportunity for domestic demand-oriented stocks.&lt;br /&gt; &lt;br /&gt; &lt;strong&gt;2. The AI outlook is shifting&lt;/strong&gt;&lt;br /&gt; &lt;br /&gt; DeepSeek&amp;rsquo;s announcement of its open-source, lower-cost AI alternative also caused a significant shift in managers&amp;rsquo; outlooks. Investors became more cautious regarding their longer-term expectations for Nvidia as the leader in AI semiconductors. Competition has also increased cost pressure among hyperscalers. Investors have increased conviction on the resilience of global foundry leaders that can weather the impacts through better economies of scale.&lt;br /&gt; &lt;br /&gt; Investors continue to view AI as a long-term secular growth opportunity, but are shifting their focus to software companies and other downstream applications that will benefit from AI.&lt;br /&gt; &lt;br /&gt; &lt;strong&gt;3. China sentiment is improving&lt;/strong&gt;&lt;br /&gt; &lt;br /&gt; Several positive trends are developing within China. In addition to the DeepSeek launch underscoring increased competitiveness in AI, a more constructive stance around technology is emerging from the Chinese government.&lt;br /&gt; &lt;br /&gt; Managers remain constructive on the Chinese consumer, noting that previous stimulus measures are beginning to take effect and improving the outlook for consumer companies. The improving environment for both the consumer and technology sectors is also reviving interest in China&amp;rsquo;s EV market, with investors becoming increasingly bullish on Chinese EV manufacturers.&lt;br /&gt; &lt;br /&gt; &lt;strong&gt;4. U.S. financial regulation has fueled uncertainty&lt;/strong&gt;&lt;br /&gt; &lt;br /&gt; The outlook for a widely anticipated M&amp;amp;A boom in the U.S. has faded before it got started, as credit spreads have widened around economic uncertainty. This has delayed an expected rally in small caps, which benefit from M&amp;amp;A activity. Investors are also reducing exposure to private equity firms and investment banks.&lt;br /&gt; &lt;br /&gt; &lt;strong&gt;5. Global economic trends are favoring gold miners and copper&lt;/strong&gt;&lt;br /&gt; &lt;br /&gt; In resource-rich markets&amp;mdash;including Australia, Canada and South Africa&amp;mdash;gold miners were key beneficiaries of increasing inflation concerns and the supportive price environment. Managers continue to be bullish in the near-term as fears of a global slowdown have risen.&amp;nbsp;&amp;nbsp;&lt;br /&gt; &lt;br /&gt; In a continuing theme, investors remain optimistic about copper in the long-term, as supply is expected to lag demand for multiple years.&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Global Equities&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;strong&gt;Investors seek to navigate tariff disruption&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Growth managers are reducing exposure to U.S. consumer discretionary companies that depend on global supply chains.&lt;/li&gt; &lt;li&gt;Given the slide in U.S. dollar strength, some managers have rotated into emerging markets, including domestic Asian and Latin American banks.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Defensive track to help temper cost pressures&lt;/strong&gt;&lt;br /&gt; &lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Risks of profit contraction saw some value investors shift toward undervalued, durable companies. These include staples and pharmaceuticals that are relatively resilient with healthy balance sheets and stable growth.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;Both global value and growth managers have increased energy exposure to reduce inflationary tail risks.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;DeepSeek raises eyebrows over AI compute spend&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Investors were caught off-guard by DeepSeek&amp;rsquo;s trained, low-cost alternative as an AI engine. This has resulted in a re-evaluation of chip exposure, since better AI accessibility has led to an increased focus on software and downstream applications being among the next wave of beneficiaries.&amp;nbsp;&lt;/li&gt; &lt;li&gt;Competition has also pushed up cost pressures among hardware hyperscalers. Investors are doubling down on the resilience of global foundry leaders that can weather the impacts through better economies of scale.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;strong&gt;Japanese banks on the cusp of a positive earnings cycle&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt; In the wake of increasingly persistent inflation, higher anticipated interest rates from the Bank of Japan (BOJ) are expected to boost net interest margins among local Japanese banks.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Cashing in on gold amid market uncertainty&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Real asset investors are taking profits on gold miners that rallied on the back of historic peak gold prices. Reallocations to other precious metals such as platinum and palladium serve as diversifiers and are expected to benefit from structural demand-supply tailwinds.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;U.S. Equities&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Reverse engines&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Relative to the pervasive bullishness at the start of the year, managers generally repositioned portfolios more defensively through the first quarter, as a pullback in mega cap tech stocks and uncertainty surrounding trade and monetary policies have muddled the outlook for growth and corporate earnings.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Trade policy uncertainty&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Last quarter, managers expected tariffs to be enacted on an industry-by-industry basis to promote reshoring of manufacturing within the U.S. Instead, the Trump administration&amp;rsquo;s across-the-board &amp;lsquo;reciprocal&amp;rsquo; tariff policy and tit-for-tat trade war with China is now expected to upend supply chains, creating significant uncertainty for both corporate management and equity managers.&lt;/li&gt; &lt;li&gt;With a wider range of potential outcomes in policy, managers are positioning portfolios more domestically and defensively, reducing cyclical exposure and adding to sectors unencumbered by tariffs.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Market uncertainty&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Government policy pronouncements are also creating uncertainty within financial markets, with higher interest rates and credit spreads, and a lack of consensus around margins and valuations undercutting a widely anticipated M&amp;amp;A boom before it started.&lt;/li&gt; &lt;li&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Managers are reducing exposure to capital-markets holdings like private equity firms and investment banks previously expected to benefit&amp;mdash;and to financials more broadly&amp;mdash;as credit risk increases.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Another false dawn for small caps&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Small-cap stocks were expected to benefit from the reorientation of production domestically, lowered levels of regulation and increased M&amp;amp;A activity. With those trends in reverse, small cap stocks have again underperformed their large cap peers.&lt;/li&gt; &lt;li&gt;While acknowledging the historical cheapness of small caps&amp;mdash;both in absolute terms and relative to large caps&amp;mdash;managers nonetheless do not expect small caps to outperform until there is more certainty on trade policy and the trajectory of interest rates.&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Emerging Markets Equities&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;China: Positive sentiment despite tariff concerns&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Tech and innovation: A more constructive stance around technology is emerging from the Chinese government. The launch of DeepSeek underscored China&amp;rsquo;s competitiveness in the AI landscape and has reignited interest in the tech sector. Cheaper models could further lower costs and allow Chinese companies, particularly those closer to AI monetization&amp;mdash;such as internet platforms&amp;mdash;to benefit.&lt;/li&gt; &lt;li&gt;Consumer rebound: Managers remain constructive on consumer stocks, noting that previous stimulus measures are beginning to filter through, as consumer confidence improves.&lt;/li&gt; &lt;li&gt;EV sector interest: Positive momentum in the technology and consumer sectors has also sparked renewed interest in China&amp;rsquo;s EV market, with some managers increasingly viewing Chinese EV manufacturers as leaders in the industry.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Valuation opportunities in Brazil&amp;nbsp;&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Brazil has faced significant capital outflows driven by fiscal spending, interest rate policy and political concerns. However, a combination of weak valuations and a potential change in leadership after the 2026 presidential election has renewed investor interest, although uncertainty around timing remains.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Early signs of easing inflation in India&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;&lt;strong&gt;&lt;/strong&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The continued underperformance of the Indian market, combined with positive economic signs such as moderating inflation, is starting to attract investors toward domestic opportunities&amp;mdash;specifically within the financial sector.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;South Africa continues to be a bright spot&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Managers maintain a positive outlook on South Africa, with investors believing the country could further benefit from a supportive gold and precious metals price environment.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Commodities: Positive views on copper and lithium&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Many investors remain positive on commodities&amp;mdash;particularly copper and lithium due to their structural growth tailwinds, which are supported by anticipated supply-demand imbalances.&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Long/Short Equity&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Reduced gross and net exposure&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Global long-short ratios reached five-year lows, reflecting a strong preference for capital preservation and decreased cyclical exposure in consumer and software sectors.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Momentum exposure reduced&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Hedge funds significantly reduced exposure to high momentum stocks, marking the largest monthly reduction since 2010.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Selective Asian market adjustments&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Funds notably reduced exposure to Chinese technology stocks amid renewed regulatory and market volatility concerns, reversing prior bullish sentiment.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 24px;&quot;&gt;&lt;strong&gt;Europe and UK Equities&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt; &lt;strong&gt;Improving cyclical picture and a German fiscal bazooka&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Cyclical indicators (PMI, loan growth and unemployment) are improving, and ongoing European Central Bank (ECB) rate cuts should provide further support for growth in Europe. Additionally, the recent German election yielded a positive surprise, as the new centrist coalition agreed on a relaxation of fiscal rules and on a major (EUR 500 billion) fiscal package. Managers expect that this environment will benefit cyclical industries (industrials, materials, banks and utilities, etc.), which remain very cheap relative to history.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Could small caps be the winners?&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Larger companies have been the primary winners from globalization. However, equity investors see a return to an era of higher trade barriers, or even protectionism, as a tailwind for smaller domestically oriented companies. These companies will be less impacted by uncertainty around global trade or economic slowdowns in the U.S. and China.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&amp;ldquo;High quality + low price&amp;rdquo; is the sweet spot for UK investors&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;The underperformance of UK domestics and mid/small caps are providing stock selection opportunities in market leaders that sold off with their lower quality peers. Consumer-exposed names in particular have been hit hard on inflation and growth concerns, but the belief is that these environments ultimately lead to the strong getting stronger. Investors are finding opportunities in best-in-class companies that are also the lowest cost operators and well-positioned to defend margins and volumes&amp;mdash;particularly in areas such as food &amp;amp; beverages and clothing retail. Heightened market volatility can offer opportunities to access such names at attractive valuation levels on a medium-to-long-term outlook.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Japan Equities&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Significant increase in uncertainty due to Trump&amp;rsquo;s tariffs&lt;br /&gt; &lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;While many managers remain relatively optimistic about the long-term outlook for banks, some are reducing their exposure in anticipation of a slower pace of policy normalization from the BOJ.&lt;/li&gt; &lt;li&gt;In addition, more managers are forecasting a strengthening of the yen against the U.S. dollar, driven by declining confidence in the dollar or a potential narrowing of interest rate differentials. This has led to a shift toward domestic demand-oriented stocks, underpinned by expectations of a recovery in real wage growth.&lt;/li&gt; &lt;li&gt;Amid this heightened uncertainty and difficulty in predicting macroeconomic trends, managers are increasingly focusing on stock-specific opportunities.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/japans-wage-growth--cpi.png&quot; /&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Rising concern over competition from Chinese manufacturers&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Japanese manufacturers, especially in the tech and auto sectors, are facing pressure as China intensifies its focus on domestic production. This shift threatens market share and pricing power of foreign firms operating in China&amp;rsquo;s manufacturing industry.&lt;/li&gt; &lt;li&gt;While many investors are scaling back their tech exposure, some value-focused managers are selectively adding to stocks they believe are resilient amid rising competition from Chinese firms, driven by attractive valuations.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Canadian Equities&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Reducing cyclicality&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Investors are favoring more defensive companies with stable demand profiles, such as consumer staples and utilities.&lt;/li&gt; &lt;li&gt;At the margin, they are using market volatility and price weakness as an opportunity to rotate from more cyclical sectors&amp;mdash;like consumer discretionary and energy&amp;mdash;into comparable stocks that offer lower leverage and stronger balance sheets (and, in the case of energy stocks, higher dividends).&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Positive outlook for gold and metals&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Materials was the strongest-performing sector in Q1, driven by a surge in gold prices as volatility linked to tariff uncertainty persisted. Managers are increasing their exposure to gold and precious metals mining royalty companies due to their defensive nature, expecting continued uncertainty around tariffs and inflation in the near term.&lt;/li&gt; &lt;li&gt;While gold miners are favored as an inflationary hedge, investors continue to be bullish about the multi-year growth opportunity for copper mining companies.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Opportunities and rotations within financials&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Managers are using the volatility to add to long-term secular growth names within financials, specifically in wealth management and alternative asset managers.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Opportunities in information technology&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Although the broader investor outlook for information technology remains cautious, managers are monitoring the sector for potential buying opportunities as valuations become more attractive.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Idiosyncratic defensive stories&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Against a backdrop of heightened volatility and concerns around stagflation, investors are seeking defensive, idiosyncratic stories&amp;mdash;particularly within industrials&amp;mdash;that can grow independently of the broader economic environment.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Australian Equities&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Attractive defensive stocks&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Managers are holding companies that they expect will perform better in an economic slowdown. However, what is considered defensive varies. Gold mining stocks are broadly accepted as defensive as prices move in sync with the gold price.&amp;nbsp;&lt;/li&gt; &lt;li&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;While historically defensive, some managers are concerned with consumer staples, noting increased competition and potential for decline in demand. Meanwhile, consumer discretionary and industrial companies with low leverage, an ability to maintain margins and quality products are considered attractive.&amp;nbsp;&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt; &lt;strong&gt;Assessing tariff impacts&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Managers are considering the impact that U.S. tariffs will have on companies, including both direct impact as well as secondary impacts of a U.S. economic recession.&amp;nbsp; There are few companies which are expected to be directly impacted, as the majority of Australian equities are either domestically focused or have U.S. exports as a minor portion of revenue. Some companies are expected to benefit&amp;mdash;either due to a lower Australian dollar making products cheaper or increased demand from other countries with reciprocal tariffs on U.S. goods. Managers are not actively trading, however, due to uncertainty regarding the tariff endgame.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Preparing for China stimulus&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Holdings in industrial metals and mining companies, particularly iron ore and copper producers, are being maintained. Managers view the companies as attractive on bottom-up fundamentals and observe that a significant new supply of iron ore will not come online until 2026, supporting current-year iron ore prices. Investors expect upside if the Chinese government stimulates to support their economy.&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Real Assets&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Listed vs. non-listed &amp;ndash; Tactical opportunities in listed REITs&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Daily trading in listed REITs reflects real-time risk and volatility, which currently offers an opportunistic landscape for active REIT managers relative to more stable private asset values.&lt;/li&gt; &lt;li&gt;Valuations continue to favor listed REITs.&lt;/li&gt; &lt;li&gt;Investors expect transaction volume in private real estate to remain low in 2025, as market participants delay decision-making due to geopolitical and market uncertainty.&lt;/li&gt; &lt;li&gt;Managers expect sector performance dispersion to widen.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Listed real estate &amp;ndash; Optimistic uncertainty&lt;br /&gt; &lt;/strong&gt; &lt;/p&gt; &lt;ul&gt; &lt;li&gt;The direct impact of tariffs on REITs is expected to be minimal due to the domestic focus of REITs, but a trade war has potential to restrain capital investment, particularly in the industrial and logistics sectors.&lt;/li&gt; &lt;li&gt;Despite macroeconomic uncertainty, rate cuts are expected later in 2025, which should serve as a tailwind to REITs.&lt;/li&gt; &lt;li&gt;Managers are most optimistic on senior housing, where an aging population is expected to outpace supply for the next decade.&lt;/li&gt; &lt;li&gt;Real estate investors are modestly rotating out of the U.S. and into Europe and the UK, where they&amp;rsquo;ve found attractive valuations.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;Infrastructure &amp;ndash; UK turns on the taps&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;Managers have been overweight select UK water utilities due to the expectation that the regulator would allow increased returns to encourage necessary capital expenditure to improve the operation and resilience of the water supply and sewerage networks. This proved correct, with British water regulator Ofwat increasing the allowed returns for the sector in late December 2024. Managers are retaining their holdings due to the defensive nature of the water utilities.&lt;/li&gt; &lt;li&gt;Across regions, managers expect the direct impact of increased tariffs imposed by the U.S. to be low, given the domestic and monopolistic focus of most infrastructure sectors.&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;style&gt; &lt;/style&gt;Tom Warburton<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {28310C87-D28D-48B6-85E4-3205374275E8}https://russellinvestments.com/uk/blog/consumers-unfazed-gdp-shrinks-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>The U.S. economy shrank in Q1 </span></li> <li><span>Economic uncertainty is high </span></li> <li><span>Diversification can be crucial in uncertain times </span></li> </ul>Fri, 02 May 2025 01:03:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;&lt;span&gt;The U.S. economy shrank in Q1 &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Economic uncertainty is high &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Diversification can be crucial in uncertain times &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Senior Investment Strategist and Head of Canadian Strategy, BeiChen Lin, unpacked the first-quarter U.S. GDP (gross domestic product) report. He also shared key watchpoints for investors and explained the value of diversification in times of uncertainty. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;More to it&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin started by noting U.S. GDP shrank during the first quarter, contracting at a 0.3% rate year-over-year. Normally, a negative GDP reading would imply economic softness, but in this case, there might have been some special factors at play, he said.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; Lin explained that U.S. imports surged during the first quarter as businesses and consumers tried to get ahead of the Trump administration’s tariffs. Imports are subtracted from headline GDP, which helped drag U.S. growth into negative territory.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; A look at other components of the GDP report suggests economic activity remained resilient during the first quarter, Lin said. “This includes personal consumption expenditures and private domestic final demand,” he remarked. In addition, S&amp;P 500 earnings growth for the first quarter is tracking around 13%—above the long-term average of 8%—while the U.S. unemployment rate remains relatively low.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Choices, choices&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin said one main watchpoint moving forward will be whether &lt;a href=&quot;https://russellinvestments.com/uk/blog/hard-data-points-soft-landing-mwir&quot;&gt;“hard” data and “soft” data continue to diverge&lt;/a&gt;. The latest hard data—like corporate earnings and layoffs—suggests the U.S. economy remains robust. Meanwhile, the latest soft data—including surveys and sentiment indicators—implies consumers are growing more worried about the economy.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; “The burning question is, what will consumers do if their concerns continue to mount? Will they keep spending or cut back? If consumers start to rein in their spending, this could impact the profit margins of businesses, which could lead to a rise in layoffs,” Lin explained. He added that with so much economic uncertainty, some companies have even omitted forward-looking guidance from earnings reports.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; The &lt;a href=&quot;https://russellinvestments.com/uk/blog/trade-talks-job-market-mwir&quot;&gt;tariff situation&lt;/a&gt; is another major watchpoint in the months ahead, Lin said. “I believe there’s a good case to be made that the United States is using tariffs as a negotiating tool,” he remarked, adding that U.S. officials have expressed optimism that some trade deals may be reached soon. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Powerful tool&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin finished by noting U.S. recession risks continue to look higher than normal. “I think there’s about a 40% chance of a recession in the next 12-18 months,” he stated. Outside of the U.S, the odds are likely even higher, Lin added.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; Diversification remains a powerful tool for investors amid all this uncertainty, he said. As proof, Lin pointed to Canada and Europe, where stocks have outperformed their U.S. counterparts despite higher recession risks. Infrastructure, which is a very defensive asset class, has also outperformed traditional equities so far this year.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt; “Ultimately, I continue to believe having a well-diversified portfolio will be crucial in the months ahead,” Lin concluded.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/pDSbQy4GXus&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/17086373&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;BeiChen Lin<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {0028726F-5F6C-4512-A7EF-A8B33A5109CD}https://russellinvestments.com/uk/blog/markets-fast-laneToday's markets are moving at breakneck speed with steep drawdowns followed by quick recoveries. That's why it's more critical than ever to stay invested, Chairman and CEO Zach Buchwald writes.Thu, 01 May 2025 00:00:00 -0700&lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;The Eagles had it right when they sang about life in the fast lane, and how it will surely make you lose your mind. Don Henley and Glenn Frey wrote that in 1976 when investing, by contrast, was downright tranquil. The pace of market shifts in the Trump era almost makes me long for a nice relaxing 1970s recession.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;The markets today move at breakneck speed. In fact, if you&amp;rsquo;ve been watching your pension the past month, you might have gotten whiplash. The market selloffs, as well as the subsequent rebounds, are happening faster than ever.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;Market cycles really have shortened and the speed has increased. That&amp;rsquo;s partly because investors are getting smarter&amp;mdash;with the internet disseminating every piece of information as soon as it gets released, and algorithms and artificial intelligence helping to shape views. We saw all this play out when President Trump announced the tariff policy on April 2, and the market fell off a cliff within minutes.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;The nature of the recoveries is changing, too. The dotcom bust was a relatively drawn out reset for valuations. But then the Global Financial Crisis reshaped the nature of a market downturn&amp;mdash;both in the intense damage, as well as the expansive nature of the policy response. Covid was the biggest but shortest recession in the history of the United States, largely because the government deployed massive stimulus tools that were developed during the GFC. Presto&amp;mdash;we discovered that recoveries can happen just as fast as the downturns.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;Life in the Fast Lane&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Now, more than ever, investors are seeing markets move at breakneck speed with shorter spans between correction and recovery.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;&lt;strong&gt;S&amp;amp;P 500 | Most intense phase of drawdown, %&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/tariff-turmoil_1.png&quot; /&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;em&gt;Source: Russell Investments, LSEG Data Stream, Drawdown Starting Points: April 2, 2025, Feb. 19, 2020, Oct. 9, 2007, Sept. 4, 2000&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;The increased speed means that timing market shifts is more difficult than ever. In the dotcom crisis and in the GFC, investors had ample opportunity to take money out of the market if, say, they had retirement expenses or tuition payments due. They also had time to get reinvested, because the recoveries went on for years.&lt;/p&gt; &lt;p&gt;All that changed dramatically during the Covid crisis and in the current tariff era. Both drawdowns and recoveries now happen at lightning speed. So investors who withdraw from the market can miss a vital recovery bounce in days or even hours. As our chart shows, the market drop-and-bounce Vs are trending narrower than ever.&lt;/p&gt; &lt;p&gt;On April 9, we saw the first evidence of a huge bounce back after the tariff-driven selloff, and since then we have had wild performance in both directions. There is new information hitting investors more often and faster than ever before. The 24-hour news cycle has become the 24-hour investment cycle.&lt;/p&gt; &lt;p&gt;On top of that, market reactions may be less predictable, too. These reactions are not only reliant on real data; false reports can be just as influential, such as the April 7 rumors about a 90-day pause on tariffs. The markets climbed when the rumors hit the tape and plunged just minutes later as they were debunked.&lt;/p&gt; &lt;p&gt;This reality leads to a simple solution for retirement investors: stay invested. The best way to catch the bounce is to remain in the game. In the short term, it may be painful; but in the long run, staying invested will help. Markets trend upward, even during the bleakest moments like the Great Depression, the GFC and the pandemic. The market will trend upward beyond the tariffs as well.&lt;/p&gt; &lt;p&gt;The other benefit of staying invested? You&amp;rsquo;re less likely to lose your mind. So perhaps we should all take another bit of advice from the Eagles: Just find a place to make your stand and take it easy.&lt;/p&gt; &lt;div&gt;&amp;nbsp;&lt;/div&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;style&gt; &lt;/style&gt;Zach Buchwald<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {B5B1E9DC-1033-413C-822F-7965DF9F9658}https://russellinvestments.com/uk/blog/stay-afloat-canada-riptide<p><strong><span>Sticking to your strategic plan may be the best way to navigate through choppy waters<br /> </span></strong></p> <div> </div>Sun, 27 Apr 2025 08:20:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Sticking to your strategic plan may be the best way to navigate through choppy waters&lt;br /&gt; &lt;/strong&gt;&lt;/p&gt; &lt;div&gt;&amp;nbsp;&lt;/div&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 16px;&quot;&gt;A &quot;Liberal wave&quot; has failed to materialize in Canada. Despite the Liberal Party expanding its seat count in Parliament, CTV News is projecting that the Liberals will still form a minority government after Monday&amp;rsquo;s election. Now, the focus turns to a different set of waves&amp;mdash;those battering the Canadian economy.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Trade turmoil&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Canada&#39;s economy is struggling to stay afloat.&amp;nbsp; The Canadian unemployment rate has risen at a much sharper pace compared to the U.S. unemployment rate, and trade policy uncertainty threatens to make things even more challenging.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/canadain-vs-us-unemployment-rate.png&quot; /&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Source: LSEG Datastream, March 2025.&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Although the U.S. has paused tariffs on imports from Canada and Mexico that comply with the Canada-United States-Mexico Agreement (CUSMA), there&amp;rsquo;s no guarantee this will last. While Prime Minister Carney has expressed a desire to diversify Canada&#39;s trading relationships, for now, roughly three-quarters of Canada&amp;rsquo;s exports are still to the United States. A protracted trade standoff with the U.S. could cause export volumes to drop and risk causing a Canadian recession.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/canadain-exports-destination.png&quot; /&gt;&lt;/span&gt;&lt;/p&gt; &lt;span style=&quot;font-size: 13px;&quot;&gt;Source: Statistics Canada, December 2024.&lt;/span&gt;&lt;br /&gt; &lt;div&gt;&amp;nbsp;&lt;/div&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Power tools&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;div&gt;Although the parties may sometimes disagree on precise policy choices, there is still a general consensus that the Canadian government needs to focus on supporting the economy through these turbulent times. While a minority Liberal government inherently means some compromises are necessary, we still believe that should a recession materialize, the different parties can rally around the flag and unleash powerful stimulus. Moreover, we believe Canada&amp;rsquo;s healthy financial position gives the government the latitude to step in.&lt;br /&gt; &lt;br /&gt; &lt;/div&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;/span&gt;&lt;img alt=&quot;BeiChen Lin, CFA&quot; src=&quot;/-/media/images/global/headshots/h-q/lin-beichen.webp?w=130&amp;amp;h=127&amp;amp;hash=BD4DA9433FA5C0E53504D13FCABD73AF&quot; style=&quot;height: 127px; width: 130px; margin-top: 20px; margin-right: 30px; margin-bottom: 20px; letter-spacing: -0.56px;&quot; /&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top: -5px;&quot;&gt;&lt;em&gt;&lt;strong&gt;&quot;While a minority Liberal government inherently means some compromises are necessary, we still believe that should a recession materialize, the different parties can rally around the flag and unleash powerful stimulus.&quot;&lt;/strong&gt;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;BeiChen Lin, CFA, CPA&lt;/strong&gt;&lt;br /&gt; Senior Investment Strategist, Head of Canadian Strategy&lt;br /&gt; &lt;/p&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p&gt;&lt;span&gt;Another potential power tool: monetary policy. The drop-off in demand in the event of a recession would likely more than offset the potential upward price pressures caused by Canada&amp;rsquo;s retaliatory tariffs. This means the Bank of Canada can cut rates aggressively while still keeping medium-term inflation expectations well-anchored.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;&lt;/strong&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;strong&gt;Don&amp;rsquo;t panic&lt;/strong&gt;&lt;/span&gt;&lt;/span&gt;&lt;/p&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Avid swimmers know the importance of staying calm in challenging waters. Likewise, we believe that Canadian investors should resist the temptation to go to cash, despite the elevated recession risks. Many Canadian companies are global, meaning they might not underperform even if Canada&amp;rsquo;s economy does. In fact, the S&amp;amp;P TSX Composite Index is roughly flat year-to-date through April 28, while the S&amp;amp;P 500 is down roughly 7%. Moreover, we believe Canadian stocks are closer to fair value than U.S. stocks.&lt;/span&gt;&lt;/div&gt; &lt;p&gt;&lt;span&gt;&lt;br /&gt; Meanwhile, we believe Canadian government bonds continue to be a key defensive lever for investors, with the potential for capital appreciation should the Bank of Canada cut rates by more than what the markets are currently pricing in.&lt;br /&gt; &lt;br /&gt; Ultimately, maintaining a long-term focus can be a good way for Canadian investors to weather the storm.&lt;/span&gt;&lt;/p&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;style&gt; &lt;/style&gt;BeiChen Lin<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {F7A69D1A-7BB6-43A8-A261-BA84669D2393}https://russellinvestments.com/uk/blog/trade-talks-job-market-mwir<p><strong><span>Key takeaways</span></strong></p> <ul style="list-style-type: disc;"> <li><span>U.S. starts trade talks with South Korea, Japan</span></li> <li><span>Tariffs on China could be lowered</span></li> <li><span>U.S. Labor market looks solid</span></li> </ul>Fri, 25 Apr 2025 09:00:36 -0700 &lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;&lt;span&gt;U.S. starts trade talks with South Korea, Japan&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Tariffs on China could be lowered&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;U.S. Labor market looks solid&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Director and Senior Investment Strategist Alex Cousley unpacked the latest headlines on trade and U.S. economic data.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Trade progress&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Cousley opened by noting it’s been a better week for equity markets, with the S&amp;P 500 up around 4% through Thursday’s close. A key reason for this is some encouraging developments in the trade war, he said.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;“Earlier this month, we stated that many Asian countries (besides China) would probably try to strike quick trade deals with the United States. This appears to be what’s happening now,” Cousley remarked. He explained that the U.S. has made progress in trade conversations with both Japan and South Korea. Treasury Secretary Scott Bessent even noted that South Korean officials brought their “A game” to the table in the latest round of talks, Cousley said.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;On the China front, he said the Trump administration’s tone moderated slightly this week, with Bessent saying the current tariff rate on Chinese imports was unsustainable. White House officials later suggested this rate could be negotiated down to 50-60%—a significant drop from the current 145% level.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Strength in numbers&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Cousley finished by noting the &lt;a href=&quot;https://russellinvestments.com/uk/blog/hard-data-points-soft-landing-mwir&quot;&gt;theme of “soft” soft data and “hard” hard data&lt;/a&gt; proved true again this week. The latest soft data—including a handful of PMI and regional Fed surveys—remained weak, while the University of Michigan’s survey on consumer sentiment indicated widespread pessimism, he said.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;On the flip side, the hard data continued to hold up well. As evidence, Cousley pointed to the latest U.S. jobless claims numbers, which still appear relatively healthy. “This suggests there isn’t much strain coming through in the labor market,” he noted. Cousley added that &lt;a href=&quot;https://www.linkedin.com/posts/paul-eitelman-2799113a_the-layoff-picture-continues-to-look-benign-activity-7321242198740508672-9uwr?utm_source=share&amp;utm_medium=member_desktop&amp;rcm=ACoAAALH-GAB7jG2UYdg8s9rBwlvf43h92JAzVI&quot; target=&quot;_blank&quot;&gt;new job openings posted on Indeed&lt;/a&gt; continue to look solid.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;With recession risks increasing, the U.S. Federal Reserve (Fed) may cut rates by more than expected at the start of 2025,&amp;rdquo; Cousley noted. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;“Overall, we’re not seeing signs yet that the lack of business confidence is flowing through to layoff decisions or cutbacks in hiring,” he concluded.&lt;/span&gt;&lt;/p&gt; &lt;!--p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/lBWlgT_dvcs&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/16917668&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p--&gt; Alex Cousley<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {9DD11D0F-92D0-4154-8139-549E6CCD2001}https://russellinvestments.com/uk/blog/pick-your-poison-higher-inflation-slower-growth<p><strong><span>Key takeaways</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Tariffs will likely cause growth to slump and inflation to rise</span></li> <li><span>Fed officials will have to decide whether full employment or price stability is a higher priority</span></li> <li><span>We expect one to two Fed rate cuts by the end of the year</span></li> </ul>Wed, 23 Apr 2025 08:20:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;&lt;span&gt;Tariffs will likely cause growth to slump and inflation to rise&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Fed officials will have to decide whether full employment or price stability is a higher priority&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;We expect one to two Fed rate cuts by the end of the year&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;The Fed&amp;rsquo;s in a bind. Policy uncertainty is high. And &lt;a href=&quot;https://russellinvestments.com/uk/insights/managing-market-volatility&quot;&gt; tariffs&lt;/a&gt; are likely to hit the U.S. economy with a &amp;ldquo;&lt;a href=&quot;https://russellinvestments.com/uk/blog/stagflation-lite-fed-growth-outlook&quot;&gt;stagflation-lite&lt;/a&gt;&amp;rdquo; impulse in coming quarters&amp;mdash;weaker growth and higher prices. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;How will central bankers prioritize their full employment and price stability mandates in the rare circumstance where they&amp;rsquo;re losing ground on both goals at the same time? And how do they make policy decisions when the economic outlook is so unclear?&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;It&#39;s complicated&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Stagflation complicates the calculus for a central bank. Weaker growth would warrant rate cuts. Higher prices argue in favor of hikes. Fed Chair Jerome Powell detailed the Fed&amp;rsquo;s approach to this scenario in a recent statement, described neatly in &lt;a href=&quot;https://www.federalreserve.gov/monetarypolicy/files/fomc_longerrungoals.pdf&quot;&gt;recent remarks&lt;/a&gt;. &amp;ldquo;We would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.&amp;rdquo;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Put differently, the bigger&amp;mdash;and more persistent&amp;mdash;miss is what will get emphasized, whether that&amp;rsquo;s sluggish growth or rising inflation. Enter version 2.0 of the &amp;ldquo;transitory&amp;rdquo; debate. Do tariffs cause a one-time increase in prices or do they generate more persistent inflation, affecting longer-term expectations? Those that believe the former will have a more dovish outlook and focus on protecting full employment&amp;mdash;and vice versa. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;There are a range of views on this issue, including among Fed leadership.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;span&gt;&lt;a href=&quot;/-/media/images/emea/pick-your-poison.png&quot;&gt;&lt;img alt=&quot;Pick your poison&quot; src=&quot;/-/media/images/emea/pick-your-poison.png&quot; /&gt;&lt;/a&gt;&lt;/span&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Wait-and-see mode&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;In Fed circles there&amp;rsquo;s something known as the Brainard principle, which states that policy makers should act with caution when faced with uncertainty. This motivates some of the Fed&amp;rsquo;s wait-and-see approach to rates right now.&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt; &lt;/p&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;/span&gt;&lt;img alt=&quot;Paul Eitelman, CFA&quot; src=&quot;/-/media/images/global/headshots/a-g/eitelman-paul.png?w=130&amp;amp;h=127&amp;amp;hash=F60296297BD2AC1C5EA69BCD338C07D3&quot; style=&quot;height: 127px; width: 130px; margin-top: 20px; margin-right: 30px; margin-bottom: 20px; letter-spacing: -0.56px;&quot; /&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top: -5px;&quot;&gt;&lt;em&gt;&lt;strong&gt;&quot;The Fed is unlikely to cut interest rates at coming meetings unless there is more convincing evidence that the business cycle is on the downswing.&quot;&lt;/strong&gt;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;Paul Eitelman, CFA&lt;/strong&gt;&lt;br /&gt; Senior Director, Chief Investment Strategist&lt;br /&gt; Russell Investments&lt;/p&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p&gt;&lt;span&gt;This uncertainty&amp;mdash;coupled with a range of Fed participant views on how problematic tariff-driven inflation might be&amp;mdash;has put the bank in a more reactive position. Why?&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Simply put, the bank is unlikely to cut interest rates at coming meetings unless there is more convincing evidence that the business cycle is on the downswing. Any decline in labor market data could cause central bankers to pivot. We&amp;rsquo;ll look at initial jobless claims, nonfarm payrolls and Indeed&amp;rsquo;s daily data on new job postings for any signs of emerging weakness in the days to come.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;With growth likely to continue slowing, we expect the Fed to cut rates at some point. In our view, one or two rate reductions in the second half of the year are likely.&lt;/span&gt;&lt;/p&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;style&gt; &lt;/style&gt;Paul Eitelman<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {F7CDE322-277D-4626-A913-FCC0210771DE}https://russellinvestments.com/uk/blog/tariff-fueled-volatility-best-ideas<p><strong><span>Key takeaways</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Even in periods of extreme volatility, researching a wider range of manager views can reveal important nuances that offer clarity to investors.</span></li> <li><span>While the future remains uncertain, our recession risks have eased slightly while we continue to monitor manager sentiment.</span></li> <li><span>Most managers on our platform expect core inflation to rise moderately in the coming months and are forecasting multiple Fed rate cuts. </span></li> <li><span>Within alternatives, hedge fund managers have lowered their net exposure while boosting their hedging activity.</span></li> </ul>Mon, 21 Apr 2025 04:55:00 -0700&lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;&lt;em&gt;How our open platform of best-of-breed managers allows us to distill complexity in the face of market turbulence by tapping into their collective intelligence.&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Key takeaways&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Even in periods of extreme volatility, researching a wider range of manager views can reveal important nuances that offer clarity to investors.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;While the future remains uncertain, our recession risks have eased slightly while we continue to monitor manager sentiment.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Most managers on our platform expect core inflation to rise moderately in the coming months and are forecasting multiple Fed rate cuts. &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Within alternatives, hedge fund managers have lowered their net exposure while boosting their hedging activity.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;In times of market stress, relying on a single viewpoint can be risky. When &lt;a href=&quot;https://russellinvestments.com/uk/blog/tariff-volatility-new-normal&quot;&gt;volatility surges&lt;/a&gt;, as it did on &amp;ldquo;Liberation Day,&amp;rdquo; cutting through the noise and accessing a range of perspectives becomes essential to making sound investment decisions.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;Indeed, different managers may interpret &lt;a href=&quot;https://russellinvestments.com/uk/blog/what-to-watch-tariff-turbulence&quot;&gt;risks and impacts&lt;/a&gt; differently, with some views being more accurate or more in-depth than others. Additionally, a manager&amp;rsquo;s prior performance is no lasting guarantee, which is why we draw on the best ideas from across the industry and form our own conviction. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;Russell Investments&amp;rsquo; open platform of best-of-breed managers gives investors the tools to do the same. To showcase the benefit of our business model, we have put together a post-tariff outlook based on the insights of portfolio managers from around the world.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Understanding April 4&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;When &lt;a href=&quot;https://russellinvestments.com/uk/blog/Consumer-spending-market-struggles-mwir&quot;&gt;volatility spiked &lt;/a&gt;on Friday, April 4, we immediately drew on insights from dozens of sub-advisors across equities, fixed income and hedge funds. Using AI-driven analytics, we synthesized their views to shape a more complete picture of the market.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;A few key themes quickly emerged:&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;&lt;strong&gt;Rising recession risk:&lt;/strong&gt; While estimates varied, some economists increased their U.S. recession probability to over 60%, which was a sharp jump from prior forecasts of 35%&amp;ndash;40%. Still, many managers believed the underlying economic fundamentals offered resilience. Our takeaway is that while the risk of recession has grown, it&amp;rsquo;s not yet seen as inevitable.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;&lt;strong&gt;Inflation expectations:&lt;/strong&gt; Research quickly showed there was broad consensus that the new tariffs would lift inflation in the near term. Most managers expect core inflation to rise by 1&amp;ndash;2 percentage points during the next few quarters.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;&lt;strong&gt;Fed in focus: Our manager research also confirmed that markets are now pricing in multiple rate cuts this year, with many managers anticipating at least two cuts aimed at cushioning economic activity.&lt;/strong&gt;&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Manager positioning&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;&lt;strong&gt;Equity:&lt;/strong&gt; Following the reciprocal tariff announcements and their subsequent pause, the equity managers we researched favored high-quality stocks with strong balance sheets, focusing on sectors less impacted by tariffs such as health care, utilities and consumer staples. Conversely, these managers did not favor sectors more exposed to global supply chain disruptions, such as autos, industrials and tech hardware.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&lt;strong&gt;Fixed income:&lt;/strong&gt; We found that managers in fixed income reduced their credit risk and saw attractive opportunities emerge due to widening credit spreads and selectively added exposure to high-quality bonds at good valuations. This reflected the manager consensus that businesses with a domestic focus, especially those with stable demand and strong pricing power, were expected to fare better in the new tariff environment.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&lt;strong&gt;Hedge funds:&lt;/strong&gt; Our research also found that hedge fund managers lowered their net exposure while increasing hedging activities. Many hedge funds kept cash ready to deploy quickly when opportunities arise, with some using cash in their trades. Additionally, managers noted increased liquidity gaps and volatility driven by algorithmic trading, as well as cautious execution strategies.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Manager sentiment&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Beyond immediate positioning, our manager research showed anxiety over the deeper long-term implications of sustained geopolitical and economic shifts. There was concern around a longer-term move toward protectionism and potentially reversing decades of globalization. The U.S. dollar, traditionally viewed as a safe-haven currency, exhibited unusual weakness during the recent events. That said, markets rebounded meaningfully following the announcement of a 90-day pause on certain tariffs, indicating that optimism still exists among managers. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Clarity of vision&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Our insights show that even in periods of extreme volatility, broadening the lens to include a wider range of manager views can reveal important nuances that provide greater clarity. While the future remains uncertain, our recession risks have eased slightly while we continue to monitor manager sentiment. Thanks to our unconstrained access to a diverse lineup of managers, our overall post-tariff outlook remains largely unchanged.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;Chris Banse<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {D7657743-B238-4BF1-9DC8-EC54E1384001}https://russellinvestments.com/uk/blog/hard-data-points-soft-landing-mwir<p><strong><span>Key takeaways</span></strong></p> <ul style="list-style-type: disc;"> <li><span>U.S. recession risks rise</span></li> <li><span>Some positive developments in the trade war</span></li> <li><span>Market volatility eases</span></li> </ul>Fri, 18 Apr 2025 06:04:00 -0700&lt;p&gt;&lt;strong&gt;&lt;span&gt;Key takeaways&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;U.S. recession risks rise&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Some positive developments in the trade war&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Market volatility eases&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Senior Director and Chief Investment Strategist for North America, Paul Eitelman, discussed what the latest U.S. economic data suggests about recession chances. He also provided an update on the trade war and recent decisions from central banks.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Data-driven&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Eitelman began by assessing the health of the U.S. economy through hard and soft data. He explained that hard data refers to measures of actual spending and economic activity, while soft data refers to how companies and consumers respond to surveys.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;“The theme of &lt;em&gt;hard&lt;/em&gt; hard data and &lt;em&gt;soft&lt;/em&gt; soft data continued this week,” Eitelman said. He explained that the latest hard data, like U.S. initial unemployment claims and retail sales, was largely positive. “Initial jobless claims fell to 215,000 for the week ending April 12, while retail sales in March were healthy—with a bounce-back in some discretionary categories like restaurants,” he said.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Meanwhile, on the soft data side, the latest manufacturing surveys from the Federal Reserve Banks of New York and Philadelphia were disappointing. In particular, both showed notable declines in capital expenditure plans, Eitelman noted.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;All told, he said the risk of a U.S. recession this year is a close call, at about 40%. “The economic outlook will hinge heavily on policy decisions in the weeks ahead,” Eitelman stated.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Positive signs&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Eitelman said there have been some recent positive developments on the trade front. For starters, the Trump administration recently announced a temporary exemption on electronics imported into the United States. In addition, President Trump signalled he’s looking at helping automakers who need more time adjusting to tariffs and also said “big progress” was made in trade negotiations with Japan.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;On the flip side, the U.S. recently announced more stringent export controls, which include restrictions on selling AI chips to China. “This could hurt the profits of some U.S. chipmakers,” Eitelman remarked.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Rate reviews&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;The European Central Bank (ECB) cut rates by 0.25% on Thursday, Eitelman said, flagging a deteriorating growth outlook. Meanwhile, Bank of Canada (BoC) officials held borrowing costs steady but noted they’re prepared to cut rates decisively if U.S. tariffs spark a recession.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;In the U.S., Federal Reserve Chair Jerome Powell emphasized the central bank’s commitment to ensuring inflation expectations remain anchored during a speech on Wednesday. “Markets saw his remarks as hawkish, and sold off as a result,” Eitelman said.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Although the S&amp;P 500 ended the holiday-shortened week down 1.5%, it proved to be a less volatile week than the prior one, he noted. “The magnitude of the daily up-and-down moves narrowed, and the S&amp;P finished up about 6% from its April 8 low,” Eitelman explained.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;In a welcome reprieve, yields on U.S. government bonds also declined this week, with the 10-year Treasury yield falling by 0.16%. “This was a welcome downshift after the big spike and chaos last week,” he concluded.&lt;/span&gt;&lt;/p&gt;Paul Eitelman<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {E242377F-6BC6-4D88-981D-BC067BA2D961}https://russellinvestments.com/uk/blog/treasury-yieldsBeiChen Lin explains what investors should keep in mind amid the recent spike in U.S. government bond yields.Wed, 16 Apr 2025 04:40:51 -0700&lt;p&gt;&lt;span&gt;U.S. government bond yields spiked dramatically last week, with the yield on the 10-year note jumping by 0.5%. This move, one of the largest since October 2008, was exceptionally rare for the bond market—with a move of this magnitude expected to occur only 1% of the time.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Amid the recent spike, here’s what investors should know:&lt;/span&gt;&lt;/p&gt; &lt;ol&gt; &lt;li&gt;&lt;b&gt;Macro issues have spilled into Treasuries.&lt;/b&gt;The unwind of a popular hedge fund trade and foreign selling potentially contributed to the rise in yields for long-duration Treasuries.&lt;/li&gt; &lt;li&gt;&lt;b&gt;Treasuries still look attractive.&lt;/b&gt; Our estimate of the fair value yield on Treasuries is lower than current yields. This suggests to us the opportunity for capital appreciation, in addition to an attractive starting current yield.&lt;/li&gt; &lt;li&gt;&lt;b&gt;Treasuries offer diversification benefits. &lt;/b&gt;Despite the near-term volatility, if economic growth slows beyond expectations, we believe Treasuries could serve as a useful cushion in a balanced portfolio by offsetting some of the potential softness in the stock market.&lt;/li&gt; &lt;/ol&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Spring surge&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;U.S. 10-year Treasury yields have risen sharply since the start of April&lt;/span&gt;&lt;/p&gt; &lt;a href=&quot;-/media/7003521a3c624a4c825e1ac7a6500e46.ashx&quot;&gt;&lt;img alt=&quot;Tariff GDP estimates&quot; src=&quot;-/media/7003521a3c624a4C825e1ac7a6500e46.ashx&quot; /&gt;&lt;/a&gt;&amp;nbsp;&lt;br /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;BeiChen Lin<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {6E0F0E55-ABF5-463C-A789-37582726547C}https://russellinvestments.com/uk/blog/tariff-volatility-new-normal<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Tariff standoff continues </span></li> <li><span>Bank of Canada’s next move</span></li> <li><span>Going for gold?</span></li> </ul>Fri, 11 Apr 2025 09:20:15 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;In the latest video update:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;Tariff standoff continues&lt;/li&gt; &lt;li&gt;Bank of Canada’s next move&lt;/li&gt; &lt;li&gt;Going for gold?&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;In the latest edition of Market Week in Review, Senior Investment Strategist and Head of Canadian Strategy, BeiChen Lin, discusses the latest developments in the ongoing U.S. trade tensions. He also shares key considerations impacting potential rate cuts by the Bank of Canada (BoC), and queries whether the momentum in gold prices can last.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Tariff standoff continues&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Markets experienced a turbulent week, marked by sharp intra-day swings in equity markets. Both China and the U.S. raised tariffs on each other’s goods, intensifying market anxiety. As a result, Lin notes that markets became &lt;a href=&quot;https://russellinvestments.com/uk/blog/tariff-recession-risk-volatility&quot;&gt;extremely oversold&lt;/a&gt;, “As of Tuesday, we saw equity markets at the 98th percentile for oversold conditions, based on our proprietary sentiment indicator.” &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He adds that such oversold conditions can create an environment where even a small piece of good news can prompt a sharp market rebound. This played out on Wednesday, when U.S. President Donald Trump announced a &lt;a href=&quot;https://russellinvestments.com/uk/blog/tariff-pause-one-day-relief&quot;&gt;temporary pause on tariffs&lt;/a&gt; for certain trading partners, sparking a surge in equity prices.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;However, the rally was short-lived. Despite Thursday’s better-than-expected U.S. inflation data, market volatility persisted, which Lin attributes to continued uncertainty around tariff levels and the broader &lt;a href=&quot;https://russellinvestments.com/uk/blog/what-to-watch-tariff-turbulence&quot;&gt;implications for the global economy.&lt;/a&gt; &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;“Our view is that as long as trade policy uncertainty remains high, volatility will likely continue,” he explains. “But volatility isn’t something investors should fear—it can create opportunity if approached with discipline and a focus on long-term objectives.”&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;BoC next move&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Shifting to the Canadian economy, Lin says the BoC is likely to continue lowering interest rates when it meets next week. He emphasizes that the Canadian labor market remains fragile, with 33,000 jobs lost in March alone.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;This weakness, coupled with potential medium-term effects from U.S. tariffs, raises recession risks. Lin highlights that the estimated probability of a Canadian recession over the next 12 months is at around 65%.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He adds that the BoC will likely be more concerned about the potential for inflation to undershoot its target in the medium term and the overall health of the Canadian economy, than short-term price increases driven by U.S. tariffs.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Going for gold?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin concludes with commentary on gold prices, which have recently hit new highs. “Investor anxiety around global economic uncertainty has helped fuel the rally,” he says. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;However, he cautions that traditional valuation models suggest gold may be overvalued at current levels. Rather than chasing momentum, he argues investors are better served by sticking to their strategic asset allocation.&lt;/span&gt;&lt;/p&gt; BeiChen Lin<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {9804AA8E-AE36-4B0A-8384-A3186C04279A}https://russellinvestments.com/uk/blog/liberation-day-to-relief-wednesday<span style="line-height: 107%;">The sharp global sell-off in equities and bonds has partially reversed within just a week. What does this mean for UK pension schemes?</span> <style> </style> <style> </style> <style> </style>Thu, 10 Apr 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways: &lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;Defined Benefit (DB) pension scheme funding levels recovered quickly, reinforcing the importance of avoiding knee-jerk reactions during volatility.&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;With gilt yields shifts, trustees should assess collateral headroom and ensure readiness to meet potential calls while avoiding crystallising losses.&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;This is a timely opportunity to review risk tolerance and ensure portfolios remain aligned with long-term objectives. &lt;div&gt;&amp;nbsp;&lt;/div&gt; &lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Tariff clouds finally &lt;a href=&quot;/uk/blog/tariff-pause-one-day-relief&quot;&gt;cleared for the stock market yesterday&lt;/a&gt;&amp;mdash;at least temporarily&amp;mdash;as the S&amp;amp;P 500 posted its best single-day return since 2008. On Thursday, stock markets across Asia, Europe, and the UK saw significant gains, while gilt yields dropped by 10 to 20 basis points.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The &lt;a href=&quot;/uk/blog/tariff-recession-risk-volatility&quot;&gt;sharp global sell-off in equities and bonds&lt;/a&gt;&amp;nbsp;has partially reversed within just a week. For UK DB pension schemes, funding levels that appeared to decline, recovered significantly only days later. We believe one of the key risks last week was investor overreaction and failing to consider the broader market context.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;DB schemes with triennial valuation dates at the end of March or the first week of April are likely to have crystallised weaker positions for the valuations. This presents a strong case for pragmatism, with a focus on incorporating post-valuation experience into the overall assessment.&amp;nbsp;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;strong&gt;&lt;/strong&gt;&lt;/span&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 24px;&quot;&gt;&lt;strong&gt;LDI diagnosis&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;20-year gilt yields have fluctuated between 5% and 5.5% since the beginning of the year. Most leveraged pooled and segregated Liability-Driven Investment (LDI) mandates currently have yield headroom exceeding 350 basis points.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The key concern for Trustee boards is whether potential collateral calls could crystallise market losses. In this context, adopting a dynamic approach is essential. Trustees must proactively assess how and where to source liquidity if LDI managers request additional collateral.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 24px;&quot;&gt;&lt;strong style=&quot;letter-spacing: -0.035em;&quot;&gt;Re-risk or de-risk?&lt;/strong&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;It is crucial not to overreact during periods of heightened market volatility. Trustees are encouraged to engage with their investment consultant or fiduciary manager to fully understand the rationale behind current and future decision-making. This moment offers a valuable opportunity to reassess risk tolerance, remain focused on long-term objectives, and allow for a structured, disciplined process to guide the way forward.&lt;/span&gt;&lt;/p&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;At the same time, investment strategy and portfolio management must remain nimble and responsive. The ability to dynamically re-risk or de-risk in response to evolving market conditions is essential and is one of the key strengths of a well-executed delegated investment approach.&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&amp;nbsp;&lt;/div&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 24px;&quot;&gt;&lt;strong&gt;Just a blip?&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Despite the sharp rebound in markets on Wednesday, trustees should be mindful that the &lt;a href=&quot;/uk/blog/what-to-watch-tariff-turbulence&quot;&gt;tariff dispute is far from resolved&lt;/a&gt;. The broader economic consequences will depend heavily on how future trade policies evolve. Tariffs are just one of several policy areas that warrant close attention. Developments in immigration and taxation policies, for example, are also likely to have far-reaching implications for institutional investors.&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;strong&gt;&lt;/strong&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;strong&gt;Looking ahead&lt;/strong&gt;&lt;/span&gt;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;In this uncertain environment, pension scheme trustees should focus on building and maintaining well-diversified portfolios that are aligned with long-term megatrends across both public and private markets. This will be key to delivering real value and managing through periods of short- to medium-term volatility.&amp;nbsp;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;For schemes opting for a run-on or run-off end game objective, such alignment is particularly important. A clear, forward-looking investment approach can help ensure that the endgame journey is both resilient and adaptable to changing market conditions&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;.&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp;&lt;/span&gt;&lt;/div&gt; &lt;div&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Similarly, for schemes considering buy-out it will be crucial to navigate this volatility especially as they head closer to price lock portfolios to avoid being knocked off course.&lt;/span&gt;&lt;/div&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;style&gt; &lt;/style&gt; &lt;style&gt; &lt;/style&gt; &lt;style&gt; &lt;/style&gt; &lt;style&gt; &lt;/style&gt; &lt;style&gt; &lt;/style&gt; &lt;style&gt; &lt;/style&gt; &lt;style&gt; &lt;/style&gt; &lt;style&gt; &lt;/style&gt; &lt;style&gt; &lt;/style&gt; &lt;style&gt; &lt;/style&gt; &lt;style&gt; &lt;/style&gt;Aqib Merchant<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {5D6E1A6B-124D-480A-A590-BCB6EF7B4BCB}https://russellinvestments.com/uk/blog/tariff-pause-one-day-relief<span style="letter-spacing: -0.56px;">After several weeks of steep selloffs, the major averages roared back on Wednesday as the Trump administration announced a 90-day pause on its reciprocal tariffs.</span>Thu, 10 Apr 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;President Trump pressed pause on reciprocal tariffs for 90 days with a 10% broad-based tariff remaining in place.&lt;/li&gt; &lt;li&gt;China was the exception to the policy reversal as it was hit with a 125% tariff but the president has expressed optimism that he would negotiate with China.&lt;/li&gt; &lt;li&gt;The S&amp;amp;P 500 enjoyed its best one-day rally since 2008 after one of the steepest short-term market corrections in history.&lt;/li&gt; &lt;/ul&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;The stock market finally got a pain reliever.&lt;br /&gt; &lt;br /&gt; After several weeks of steep selloffs, the major averages roared back on Wednesday as the Trump administration announced a 90-day pause on its reciprocal tariffs. The move marked an important de-escalation and shift in U.S. trade policy toward negotiating deals while maintaining a hard line against China. The 9.5% single-day return for the S&amp;amp;P 500 Index was the largest ever outside of 2008.&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Waitin&amp;rsquo; on a sunny day&lt;/strong&gt;&lt;/h2&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;Tariff clouds finally cleared for the stock market&amp;mdash;at least temporarily&amp;mdash;as the S&amp;amp;P 500 posted its best single-day return since 2008&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;Best single-day return on the S&amp;amp;P 500 Index since 2008&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/best-single-daypng2.png&quot; /&gt;&amp;nbsp; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;em&gt;Source: Russell Investments, LSEG Datastream. April 9, 2025&lt;/em&gt;&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;em&gt;&lt;strong&gt;&lt;/strong&gt;&lt;/em&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;strong&gt;What we know&lt;/strong&gt;&lt;/span&gt;&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;letter-spacing: -0.56px;&quot;&gt; &lt;li&gt;&lt;strong&gt;10% tariffs remain.&amp;nbsp;&lt;/strong&gt;The Trump administration will maintain a 10% baseline tariff on key trading partners while it pursues deals over the coming months.&lt;/li&gt; &lt;li&gt;&lt;strong&gt;China was not spared.&lt;/strong&gt;&amp;nbsp;Instead, President Trump ratcheted up the tariff rate on China to a sky-high 125%.&amp;nbsp;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;Coming to the table.&lt;/strong&gt;&amp;nbsp;U.S. tariffs were previously both large and broad-based. While they remain higher across the board, many countries are expected to negotiate a deal now that a pause is in place.&lt;/li&gt; &lt;li&gt;&lt;strong&gt;All eyes on China.&lt;/strong&gt;&amp;nbsp;Importantly, Trump expressed openness to negotiate with China&amp;rsquo;s President Xi Jinping even though China has become the focal point of the tariff battle.&lt;/li&gt; &lt;/ul&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;.&lt;/p&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;/span&gt;&lt;img alt=&quot;Paul Eitelman, CFA&quot; src=&quot;/-/media/images/global/headshots/a-g/eitelman-paul.png?w=130&amp;amp;h=127&amp;amp;hash=F60296297BD2AC1C5EA69BCD338C07D3&quot; style=&quot;height: 127px; width: 130px; margin-top: 20px; margin-right: 30px; margin-bottom: 20px; letter-spacing: -0.56px;&quot; /&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top: -5px;&quot;&gt;&lt;em&gt;&lt;strong&gt;&quot;Markets will eye upcoming trade negotiations and whether economic and earnings growth can continue to show resilience.&quot;&lt;/strong&gt;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;Paul Eitelman, CFA&lt;/strong&gt;&lt;br /&gt; Senior Director, Chief Investment Strategist&lt;br /&gt; Russell Investments&lt;/p&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;Reasons to believe&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;Today&amp;rsquo;s policy off-ramp provided investors with much-needed clarity on the path forward. While a suspension of sweeping tariffs is a definitive step in the right direction, it&amp;rsquo;s important to note that we are not out of the woods yet. Markets will eye upcoming trade negotiations and whether economic and earnings growth can continue to show resilience.&lt;br /&gt; &lt;br /&gt; At Russell Investments, we entered this period of volatility with defensive and well-diversified positioning. Our focus has been reminding our clients that spikes in volatility&amp;mdash;even painful double-digit corrections like this one&amp;mdash;are often short-lived. We continue to encourage clients to stay invested in this period of policy uncertainty and heightened risk aversion.&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;Paul Eitelman<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {7BDF9F4F-2F45-4847-B3E5-1AC361B408FE}https://russellinvestments.com/uk/blog/will-stock-bond-correlations-divergeRussell Investments' long-term strategic positioning amid tariff uncertaintyMon, 07 Apr 2025 08:20:00 -0700&lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;2025 STRATEGIC POSITIONING&lt;/strong&gt;&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;Key takeaways&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc; letter-spacing: -0.56px;&quot;&gt; &lt;li&gt;We prefer equity to credit at a three-to-five-year time horizon&lt;/li&gt; &lt;li&gt;In fixed income, we remain overweight duration&lt;/li&gt; &lt;li&gt;We believe private markets present attractive opportunities for clients with long-term time horizons&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;How markets behave over a three-year period carries a lot of uncertainty. In 2025, we see several risks: tariffs, a renegotiation of defense alliances and stocks living up to earnings expectations. While the issues clouding visibility may change over time, the forecast is never 100% clear.&lt;br /&gt; &lt;br /&gt; In setting a strategic allocation, we use a dual-horizon approach. First, we develop an allocation using equilibrium-like capital market assumptions tailored to a 20-year horizon. Next, using a refined description of where we see markets evolving over the next three to five years, considering the path of interest rates, spreads and the different economic scenarios, we make adjustments to our long-term positioning, incorporating this three- to -to-five-year forecast.&lt;br /&gt; &lt;br /&gt; Let&amp;rsquo;s take a look at our capital market assumptions and discuss how we are strategically positioned for 2025 and beyond.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Capital Market Outlook&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;&lt;strong&gt;Exhibit 1 shows our capital market assumptions over the next five years relative to equilibrium.&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt; &lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/capital-markets-equilibrium.png&quot; /&gt;&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;p&gt;&lt;em&gt;Notes: Duration premia: 10-year treasury against cash; IG credit: ICE BofA Single-A 5-7yr US Corporate Index premia over 5-yr Single-A zero-coupon bond. HY: ICE BofA Single-B HY Index over 5-yr B zero-coupon bond. Equity premia: Excess return over 3-month T bill, equilibrium returns refer to US LC, next 5 years refers to Global Dev LC.&lt;/em&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Equities:&lt;/strong&gt; With high cash rates, modestly reduced earnings growth forecasts over the next several years, and high P/E (price-to-earnings) ratios in certain segments, we expect the equity risk premium to be slightly lower than normal.&lt;br /&gt; &lt;br /&gt; &lt;strong&gt;Duration:&lt;/strong&gt; We forecast decreasing cash rates, with a steepening yield curve. Our forecast is for Treasuries to produce a higher yield than cash along with capital appreciation from roll down.&lt;br /&gt; &lt;br /&gt; &lt;strong&gt;Credit:&lt;/strong&gt; With a tight starting point for credit spreads, yields are likely to be lower than normal. Moreover, we anticipate spreads eventually reverting to more normal levels, which would lead to capital depreciation. Together, these produce a lower forecast for the credit risk premium over the coming years.&lt;br /&gt; &lt;br /&gt; &lt;strong&gt;Equity-Bond Correlation:&lt;/strong&gt; The stock-bond correlation is an important consideration in balancing risk-on and risk-off exposures. To maintain similar volatility, more bonds are required in an allocation when this correlation is elevated. We show the historical rolling correlation in Exhibit 2, where we note that this correlation measure, currently at 0.2, appears to be receding since its recent peak. Inflation shocks from trade or fiscal policy missteps can cause this measure to rise again, however.&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Cyclical considerations&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;&lt;strong&gt;Exhibit 2: Rolling 1-Year Correlation &amp;ndash; Stocks &amp;amp; Bonds&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/one-year-correlation.png&quot; /&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&lt;em&gt;Note: 52-weeks rolling correlation between S&amp;amp;P500 and 10-year US treasury&lt;/em&gt;&lt;br /&gt; &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&lt;strong&gt;Increased unpredictability:&lt;/strong&gt; There is heightened uncertainty coming from the current U.S. administration&amp;rsquo;s policies, such as challenging existing global trade arrangements, border policies and defense alliances.&lt;br /&gt; &lt;br /&gt; &lt;strong&gt;Recession risk:&lt;/strong&gt; Lower immigration, reduced government spending and higher tariffs are likely to &lt;a href=&quot;/uk/blog/stagflation-lite-fed-growth-outlook&quot;&gt;temper U.S. growth&lt;/a&gt;. Despite these headwinds, the U.S. economy &lt;a href=&quot;/uk/blog/volatility-vengeance-mwir&quot;&gt;looks reasonably strong&lt;/a&gt;, although business and consumer confidence are deteriorating.&lt;br /&gt; &lt;br /&gt; &lt;strong&gt;Persistent moderate inflation:&lt;/strong&gt; We expect inflation to gradually decline toward the U.S. Federal Reserve&amp;rsquo;s target, setting the stage for rate cuts. Although there will be uncertainty around the impacts of tariffs and restrictive immigration policies, we expect two rate cuts in the latter half of the year.&lt;br /&gt; &lt;br /&gt; &lt;strong&gt;Unemployment and wage growth:&lt;/strong&gt; Our expectation for job and wage growth points toward a balanced rather than an overheating economy.&lt;br /&gt; &lt;br /&gt; We summarize cyclical risks impacting markets over the next three to five years into the following potential scenarios.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&lt;strong&gt;Exhibit 3: Economic Scenario Definitions&lt;br /&gt; &lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;/span&gt;&lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/bullet-market.png&quot; /&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;Taking account of our CMAs (Exhibit 1) and cyclical risks, we come to the following strategic positions.&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;Exhibit 4: Strategic Positions against Benchmark&lt;/strong&gt;&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;&lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/strategic-positions.png&quot; /&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;Positioning Rationale&lt;/span&gt;&lt;br /&gt; &lt;/strong&gt;&lt;/p&gt; &lt;div&gt;&lt;strong&gt;Cyclical preference for equity over credit&lt;/strong&gt;&lt;br /&gt; &lt;br /&gt; With a relatively low credit premium forecast&amp;mdash;a result of compressed spreads&amp;mdash;we see limited upside for credit exposure. At the same time, there are large segments of the global equity market that are reasonably priced given the cyclical backdrop. As a result, we see more risk-adjusted upside in equity than in credit.&amp;nbsp; &amp;nbsp;&amp;nbsp;&lt;br /&gt; &lt;br /&gt; &lt;strong&gt;Nominal Treasury Bonds and Duration&lt;/strong&gt;&lt;br /&gt; &lt;br /&gt; We remain overweight duration. Over the next five years, we project 10-year U.S. government bonds to outperform cash by 2.7%, compared to 1.6% over an equilibrium-like horizon. We think the duration overweight should be taken in the belly of the curve (intermediate bonds).&lt;br /&gt; &lt;strong&gt;&lt;br /&gt; Treasury Inflation-Protected Securities (TIPS)&lt;/strong&gt;&lt;br /&gt; &lt;br /&gt; We use inflation-linked bonds and intermediate nominal bonds to achieve our duration positioning. The real yield on TIPS is in the 1.5%-2% range, which is reasonably attractive against history. Moreover, policy errors coming from trade wars and other actions have the potential to trigger an inflation episode. With high real yields and inflation protection, we see TIPS as a safe way to obtain duration exposure.&lt;br /&gt; &lt;br /&gt; &lt;strong&gt;Alternative Diversifiers&lt;/strong&gt;&lt;br /&gt; &lt;br /&gt; Alternative diversifiers, such as cross-asset trend and actively managed long volatility strategies, can complement duration in protecting portfolios from drawdowns. We view these positions as stable diversifiers in a portfolio. Long volatility mitigates sharp drawdowns, while cross-asset trend provides resilience during prolonged declines. Unlike bonds, these strategies are not structurally exposed to inflation shock risk, enhancing diversification.&lt;br /&gt; &lt;br /&gt; &lt;strong&gt;Private Markets&lt;/strong&gt;&lt;br /&gt; &lt;br /&gt; We believe private markets present attractive opportunities for clients with long-term time horizons. Trade wars can cause considerable shifts in supply chains that long-term private asset investors can capitalize on&amp;mdash;with the right insight. Of course, investing in private assets comes with liquidity constraints, locking up capital for longer periods. Like alternative diversifiers, private equity is a stable recommendation in portfolios that can take on illiquidity.&lt;/div&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&amp;nbsp;&lt;/p&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;style&gt; &lt;/style&gt;<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {608B10AC-0693-4057-BAAF-36A8378C3DE2}https://russellinvestments.com/uk/blog/tariff-recession-risk-volatility<span style="letter-spacing: -0.56px;">Russell Investments' Van Luu provides an update on the market volatility experienced following the announcement of President Trump's "reciprocal tariffs".</span>Mon, 07 Apr 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways&lt;/strong&gt;:&lt;/p&gt; &lt;ul class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt; &lt;li&gt;Economic data has led us to raise our assessment of recession risk.&amp;nbsp;&lt;/li&gt; &lt;li&gt;However, some indicators suggest that equity markets are being heavily oversold.&lt;/li&gt; &lt;li&gt;Russell Investments are closely monitoring market developments and policy announcements. Register for our client webinar tomorrow on Tuesday 8 April where we will discuss our position in greater depth.&lt;/li&gt; &lt;/ul&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &amp;nbsp; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;After President Trump announced higher-than-expected reciprocal tariffs on virtually all trading partners of the U.S. last Wednesday, &lt;a href=&quot;/uk/blog/tariff-day&quot;&gt;volatility spiked in financial markets&lt;/a&gt;. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;As of this morning, S&amp;amp;P 500 futures have fallen by 20% from their December 2024 highs, which is considered a (somewhat arbitrary) threshold for a bear market.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The &lt;a href=&quot;/uk/blog/what-to-watch-tariff-turbulence&quot;&gt;tariff announcements and recent economic data&lt;/a&gt;&amp;nbsp;have led us to raise our assessment of recession risk from 30% to about 50%, resulting in us seeing roughly even odds between a downturn and continued, though slower, growth.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;However, markets have already moved to price increasing recession risk. Money markets discount more than 4 rate cuts of 25 basis points by the U.S. Fed by end of the year.&amp;nbsp;&lt;br /&gt; &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Some indicators also suggest that equity markets are heavily oversold, and sentiment has reached a state of panic:&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The VIX indicator measuring implied volatility of the S&amp;amp;P 500 index reached 58 this morning (7:45 GMT), a level that roughly matches the peaks seen during the 2008 Global Financial Crisis.&lt;/span&gt;&amp;nbsp;&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;ul&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Our proprietary contrarian sentiment indicator of U.S. stock markets triggered a Stage 2 oversold signal on Friday. An oversold signal can mean that the selloff is stretched, and a rebound is becoming more likely. Markets are likely to remain volatile until there is more policy certainty.&amp;nbsp;&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;Oversold condition&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;The Contrarian Indicator aggregates sentiment signals from market prices, surveys, and investor positioning to gauge whether a market move is extended, i.e. oversold (panic) or overbought (euphoria). At the sentiment extremes, the likelihood of a move in the opposite direction rises.&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;strong&gt;Composite Contrarian Indicator (U.S.)&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/composite-contrarion-indicator_1.png&quot; style=&quot;letter-spacing: -0.56px;&quot; /&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;/span&gt;&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Source: Russell Investments, as of 4 April 2025&lt;/span&gt;&lt;/em&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The portfolio managers at Russell Investments are closely monitoring market developments and policy announcements and we continue to manage our investments according to our long-standing Design-Construct-Manage framework through the current volatility.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;We are holding a client webinar tomorrow on Tuesday 8 April. Please reach out to your Russell Investments contact for details.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;Van Luu<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {42716124-5101-40AF-BBCC-2B9B776E6371}https://russellinvestments.com/uk/blog/consumer-spending-market-struggles-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Recession risks rise after new tariff announcement. </span></li> <li><span>U.S. government bonds rally</span></li> <li><span>All eyes on the U.S. consumer</span></li> </ul>Fri, 04 Apr 2025 01:50:30 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;U.S. recession risks have increased&lt;/li&gt; &lt;li&gt;U.S. government bonds are rallying&lt;/li&gt; &lt;li&gt;The health of the U.S. consumer is an important watchpoint&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Director and Senior Investment Strategist Alex Cousley discussed the details of the Trump administration&amp;rsquo;s tariff plan and the market&amp;rsquo;s reaction.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Negotiate or retaliate?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Cousley began by noting that U.S. President Donald Trump&amp;rsquo;s reciprocal tariff plan could increase the effective U.S. tariff rate by 14%. He said this is greater than expected and is also very large in a historical context.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;We believe these tariffs have increased &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/trade-war-recession-risks-mwir&quot;&gt;recession risks&lt;/a&gt;&lt;/span&gt;&lt;span&gt; in the United States. In our view, the chances of a recession in the next year are now close to 50%,&amp;rdquo; Cousley remarked. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He said the new U.S. tariffs target Asian countries&amp;mdash;including China, Japan, South Korea and Taiwan&amp;mdash;more aggressively than the rest of the world. While it&amp;rsquo;s unclear exactly how countries will respond, some nations&amp;mdash;particularly in Asia&amp;mdash;have signaled they&amp;rsquo;ll look to lower tariffs on U.S. imports. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;Vietnam is one of the most prominent examples of this, but Japan and South Korea have also suggested they&amp;rsquo;ll take a negotiating stance,&amp;rdquo; Cousley remarked. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;On the other hand, in a significant move of retaliation, China announced Friday that it will slap a 34% tariff on all U.S. imports starting April 10.&amp;nbsp;&lt;br /&gt; &lt;br /&gt; Cousley finished by noting the European Union hasn&amp;rsquo;t been as vocal about any actions it might take.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Market movers&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;In the aftermath of the announcement, U.S. stocks sold off sharply on Thursday, with the S&amp;amp;P 500 declining by approximately 4.5%. Cousley said non-U.S. markets also fell, but by a lesser extent. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;In U.S. government bond markets, yields fell as prices rose. &amp;ldquo;We saw a pretty aggressive rally in 2-year and 10-year Treasury notes as investors piled into bonds,&amp;rdquo; Cousley remarked. The outperformance is a result of rising recession risks, he said, adding that Treasurys still look close to fair value. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;With recession risks increasing, the U.S. Federal Reserve (Fed) may cut rates by more than expected at the start of 2025,&amp;rdquo; Cousley noted. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Switching to currencies, he said the U.S. dollar sold off Thursday in an unusual move. Meanwhile, the euro rallied, as did typical safe-haven currencies like the Japanese yen and Swiss franc. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Spending under scrutiny&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Cousley wrapped up with a look at recent U.S. economic data, which was a bit of a mixed bag. The latest ISM (Institute for Supply Management) surveys were weaker than many economists were expecting, while initial U.S. jobless claims edged down last week. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;In general, the data shows U.S. consumers are still behaving in a normal manner. The decline in consumer confidence hasn&amp;rsquo;t led to a decline in consumer spending. However, we expect that the latest tariffs will be a headwind to consumer spending moving forward,&amp;rdquo; Cousley stated. He said uncertainty around the tariff situation&amp;mdash;and how it could potentially impact U.S. capital expenditures&amp;mdash;is what led Russell Investments&amp;rsquo; strategist team to increase its recession risk this week. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Cousley explained the team uses a cycle, valuation and sentiment framework to guide its investment decision-making process. He said the business cycle outlook has deteriorated in the wake of the tariff announcement, while the team&amp;rsquo;s measure of investor sentiment has reached pessimistic levels.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;We haven&amp;rsquo;t seen sentiment move to a level of panic yet, but it&amp;rsquo;s firmly in the pessimistic stage,&amp;rdquo; Cousley stated, adding that reaching the panic threshold could present potentially attractive buying opportunities.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/eRFT2oYr34c&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/16917668&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;Alexander Cousley<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {9B188BC9-D6A9-4F8B-AAAF-C7E3A636F62D}https://russellinvestments.com/uk/blog/what-to-watch-tariff-turbulence<span style="letter-spacing: -0.56px;">With markets in freefall since “Liberation Day”, what happens next?</span>Fri, 04 Apr 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways&lt;/strong&gt;:&lt;/p&gt; &lt;ul class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt; &lt;li&gt;Direct impact of U.S. tariffs is small but a global trade war is the real threat.&lt;/li&gt; &lt;li&gt;The reaction from global policymakers, particularly central banks, will shape market sentiment.&amp;nbsp;&lt;/li&gt; &lt;li&gt;Despite European economies showing signs of recovery before the tariffs, most European governments, including the UK, are fiscally limited in their ability to respond.&lt;/li&gt; &lt;li&gt;Markets may stay volatile until policy clarity returns, but long-term fundamentals will ultimately reassert themselves.&lt;/li&gt; &lt;/ul&gt; &lt;hr style=&quot;letter-spacing: -0.56px;&quot; /&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%; font-size: 24px;&quot;&gt;&lt;strong&gt;What&amp;rsquo;s happened?&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; As investors are uncomfortably aware of, global equity markets have been in freefall since President Trump&amp;rsquo;s announcement of &amp;ldquo;reciprocal tariffs&amp;rdquo; on April 2. As of writing (April 4 16:00 BST), UK and European shares are down by close to 10% since the announcement. Government bond yields have fallen by 0.2 to 0.3 percentage points&amp;nbsp; as investors rush to safe havens.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The direct impact of U.S. tariffs on both economies is relatively small. Exports to the United States from the European Union account for just 2.9% of EU GDP in 2023. The exposure of the UK is smaller at 2.3% of GDP. On their own, these tariffs would be manageable, knocking somewhere in the order of 0.5% off GDP growth projections for 2025, with a smaller impact in the UK compared to the EU.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;However, the global nature of the trade war is a problem. The EU might only have a small direct exposure to U.S. exports, but overall exports of goods account for nearly 40% of GDP. For the UK, it&amp;rsquo;s around 15% of GDP. Markets fear that the trade war, potential retaliation and the policy uncertainty from the White House will cause a global recession and magnify the impact of the individual tariff decisions.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%; font-size: 24px;&quot;&gt;&lt;strong&gt;Retaliate or negotiate?&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;One issue to watch is whether governments choose to retaliate or negotiate. China today announced 34% retaliatory tariffs on U.S. imports. European Commission (EC) President Ursula von der Leyen has taken a more measured approach, saying that she will wait four weeks before announcing a response. And that the EC preferred to negotiate to &amp;ldquo;remove any remaining barriers to transatlantic trade.&amp;rdquo; The UK has made no official announcement, presumably on relief at the &amp;ldquo;low&amp;rdquo; 10% tariff imposed.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Another key factor will be whether President Trump decides to reduce tariffs on countries that he feels are taking steps to reduce what he perceives as unfair trade barriers. There is precedent for this behaviour, as President Trump has a track record from his first term of making aggressive policy announcements to exert the maximum possible pressure, before relenting and announcing that he has achieved a great deal.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%; font-size: 24px;&quot;&gt;&lt;strong&gt;Release the doves&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Meanwhile, the response of policy makers is also worth watching. Markets are anticipating more rate cuts from the ECB and the Bank of England. Dovish statements from central bankers will help to settle market nerves. The reaction of Fed chair Jay Powell will matter most. Indications that the inflation impact of tariffs will slow the pace of easing could deepen investor fears about a U.S. and global recession. Conversely, a clear signal that policy will quickly become accommodative to support economic growth will help investor confidence.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%; font-size: 24px;&quot;&gt;&lt;strong&gt;Europe&amp;rsquo;s trajectory&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Bear in mind that Europe&amp;rsquo;s economy was on an improving trend prior to the &amp;ldquo;Liberation Day&amp;rdquo; announcement. Bank lending had been trending higher since late 2023 and retail spending was gradually improving. There is also a seismic change underway in Germany&amp;rsquo;s fiscal policy since the election, with added infrastructure and defence spending.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Of course, the other major economies in the region&amp;mdash;France, Italy and Spain&amp;mdash;are still constrained on the fiscal side with government debt-to-GDP ratios over 100%. Same goes for the UK. The takeaway? Outside of Germany, governments will be limited in providing fiscal support to offset the trade shock.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%; font-size: 24px;&quot;&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;We have been through these periods of market panic before. Markets are likely to remain volatile until there is more policy certainty. Over time, the long-term fundamentals of economic growth and corporate profit growth will come back into focus.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;At Russell Investments, we remain focused on portfolio diversification through this volatile period and are watching closely our measures of investor sentiment for signs that market dislocations have moved to an extreme.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;Andrew Pease<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {BF115C67-F56C-4561-889D-5065DEE59344}https://russellinvestments.com/uk/blog/tariff-day<span style="letter-spacing: -0.56px;">President Trump’s sweeping announcement on retaliatory tariffs is complex. We break down the potential impacts for investors.</span>Thu, 03 Apr 2025 00:00:00 -0700&lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;U.S. stocks underperformed in the first quarter of 2025, hit by a double whammy from intensifying policy uncertainty and a U-turn in select mega cap stocks. Into this volatile backdrop, April 2&amp;mdash;President Trump&amp;rsquo;s so-called Liberation Day&amp;mdash;was circled on investors&amp;rsquo; calendars as a catalyst.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Tariff talk&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Yesterday&#39;s announcement from the Rose Garden marked another bold policy step, charging large reciprocal tariffs against many of the United States&amp;rsquo; largest trading partners. For example, the policy includes:&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;A new 10% base tariff on most trading partners, effective April 5 &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;A ramp-up a few days later to match half of the tariff and non-tariff barriers that countries impose on the U.S.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; We estimate the average effective tariff rate could increase by almost 14%&amp;mdash;a historically large increase in trade duties. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Two higher level observations are important here. First, the reciprocal tariffs leave room for the duties to get negotiated away. Case-in-point: Some very large exporters like Vietnam have already said that they will cut all tariffs on U.S. products. Second, the exemptions separate the reciprocal policy from Trump&amp;rsquo;s sector-level tariffs like steel, aluminum, and automobiles. This suggests to us that those sector-level tariffs are likely to be more permanent.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &amp;nbsp;&lt;img alt=&quot;Paul Eitelman, CFA&quot; style=&quot;width: 130px; height: 127px; float: left; margin-right: 30px; margin-bottom: 20px; margin-top: 20px;&quot; src=&quot;/-/media/images/global/headshots/a-g/eitelman-paul.png?w=130&amp;amp;h=127&amp;amp;hash=F60296297BD2AC1C5EA69BCD338C07D3&quot; /&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top: -5px;&quot;&gt;&lt;em&gt;&lt;strong&gt;&quot;We estimate the average effective tariff rate could increase by almost 14%&amp;mdash;a historically large increase in trade duties.&quot;&lt;/strong&gt;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;Paul Eitelman, CFA&lt;/strong&gt;&lt;br /&gt; Senior Director, Chief Investment Strategist&lt;br /&gt; Russell Investments&lt;/p&gt; &lt;hr /&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Growth hit&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The administration had already pushed harder than expected on trade policy with tariffs on imports from China, Canada, Mexico, steel, aluminum, and automobiles &amp;amp; parts. While the policies could support domestic manufacturing over the longer-term, we &lt;a href=&quot;/uk/blog/estimating-tariff-impacts&quot;&gt;estimated these measures&lt;/a&gt;&amp;nbsp;were likely to act as a drag on real GDP growth of 0.5-0.75% and a boost to core PCE inflation of 0.75%.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Today&amp;rsquo;s reciprocal tariffs could dent real GDP growth by another 0.75% and lift core PCE inflation by an additional 1%. That would likely leave the U.S. growth outlook at 1% or less for 2025 and push core inflation north of 3.5%. Accordingly, we&amp;rsquo;ve raised our estimate of U.S. recession risk in the year ahead from 30% to 35-40%.&lt;br /&gt; &lt;/span&gt;&lt;/p&gt; &lt;div&gt;&amp;nbsp;&lt;/div&gt; &lt;strong&gt;Stunted growth?&lt;br /&gt; &lt;/strong&gt;&lt;em&gt;Estimated tariff impacts on GDP for 2025 vary&lt;br /&gt; &lt;/em&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/apr2tariff.jpg&quot;&gt;&lt;img alt=&quot;Tariff GDP estimates&quot; src=&quot;/-/media/images/global/blogs/images/apr2tariff.jpg&quot; /&gt;&lt;/a&gt;&amp;nbsp;&lt;br /&gt; &lt;em style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Source: Russell Investments adaptation of model-based estimates in &quot;The Fiscal, Economic, and Distributional Effects of a 20% Broad Tariff&quot; (The Budget Lab, 2025) and &quot;How Will Trump&#39;s Universal and China Tariffs Impact the Economy?&quot; (Tax Foundation, 2024). Our adaption assumes a 14-percentage-point increase in the U.S. effective tariff rate.&lt;br /&gt; &lt;/span&gt;&lt;/em&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Pessimism not panic&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;U.S. markets were moderately risk-on through Wednesday&#39;s session, but sold off sharply Thursday morning. As of 8 a.m. Pacific time on Thursday, the S&amp;amp;P 500 was down approximately 4% and the Dow Jones had shed roughly 1,500 points. Meanwhile, Treasury yields declined by approximately 15 basis points as investors flocked to the safety of bonds.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;We remain focused on holding diversified portfolio strategies into this period of extreme policy uncertainty. And we will be closely monitoring our measures of market psychology for potential dislocations in markets. Currently our signals show pessimism in the U.S. stock market but haven&amp;rsquo;t reached an extreme level of panic. Treasury yields at 4% are in-line with our estimates of fair value for bonds.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;Paul Eitelman<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {65F55ABD-8776-4D28-8F10-DCBA21A61FB8}https://russellinvestments.com/uk/blog/germany-fiscal-shift-big-deal<span style="letter-spacing: -0.56px;">Germany is taking the handbrake off its fiscal policy and it's a big deal for European growth and financial markets.</span>Mon, 31 Mar 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Germany is taking the handbrake off its fiscal policy, and we believe this will have significant implications for European economic growth and financial markets.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;The direct growth impact of the fiscal package on German GDP will not be felt until 2026 due to implementation lags, but we expect there to be an enduring impact that extends beyond 2027, with spillover effects outside Germany.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Financial markets cheered the arrival of the fiscal package. The German stock market index DAX had already outperformed global peers in 2025, but rose further on the news, as did the euro.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;In our view, a potential sell-off in European assets in response to trade war escalation would be a buying opportunity. We view capital repatriation to Europe as benefitting euro area stocks and the euro in the long term.&lt;br /&gt; &lt;div&gt;&amp;nbsp;&lt;/div&gt; &lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Donald Trump and JD Vance managed what neither the Covid pandemic nor the Russian invasion of Ukraine were able to: make Germany ditch its fiscal restraint to ramp up spending on defence and infrastructure.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;The importance of reforming the so-called &amp;ldquo;debt brake&amp;rdquo; to allow for greater public investments can hardly be overstated. This blog looks at how the policy shift came about and its implications for European economic growth and financial markets.&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;&lt;strong&gt;&lt;/strong&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;strong&gt;A watershed moment&lt;/strong&gt;&lt;/span&gt;&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;A pivotal moment in Germany&amp;rsquo;s reassessment was the televised meeting between U.S. President Donald Trump and Ukrainian President Volodymyr Zelenskyy on February 28, 2025. The encounter in the Oval Office quickly escalated into a heated exchange and signalled a shift in U.S. foreign policy priorities. It became clear to politicians in Berlin and Brussels that Europe could no longer rely solely on the American security umbrella.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;For Friedrich Merz, the soon-to-be chancellor of Germany, this confrontation was a watershed moment. Europe&amp;rsquo;s largest economy had to assume greater responsibility for its own security and economic resilience. Having resisted a reform of the &amp;ldquo;debt brake&amp;rdquo; for years while in opposition, it took him four days to hammer out a deal to reform the balanced budget rule. His future &lt;a href=&quot;/uk/blog/german-elections-2025&quot;&gt;coalition partner, the SPD&lt;/a&gt;, had already argued for a change to the budget rules to allow for greater investment in infrastructure and defence.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;To implement the plan, constitutional amendments were necessary. Merz&amp;rsquo;s CDU/CSU (the Union parties) and the SPD secured last-minute backing from the Greens for the required two-thirds majority in Germany&amp;rsquo;s lower house, the Bundestag. In a break with convention, the three parties used their votes in the outgoing Bundestag to pass the package as they would not have had the required super-majority in the newly elected parliament.&amp;nbsp;&lt;br /&gt; &lt;/span&gt;&lt;/p&gt; &lt;div&gt;The agreed fiscal package is substantial and consists of these key elements:&lt;/div&gt; &lt;div&gt;&amp;nbsp;&lt;/div&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;An exemption of defence spending (over 1% of GDP) from the debt brake, essentially uncapping defence.&lt;/span&gt;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;A &amp;euro;500bn infrastructure fund deployed over 12 years, of which &amp;euro;100bn will immediately be channelled into the Climate Transition Fund (a concession to the Greens).&lt;/span&gt;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;The remainder of the fund is for additional infrastructure investments, with &amp;euro;300 billion for the federal government and &amp;euro;100 billion for state governments.&lt;/span&gt;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;State governments will be allowed to run annual deficits of up to 0.35% of GDP.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Debt brake origins&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;Instituted in 2009 amid the global financial crisis, Germany&#39;s debt brake was enshrined in the constitution to ensure fiscal discipline. This rule mandated balanced budgets for both federal and state governments, permitting only minimal structural deficits&amp;mdash;capped at 0.35% of GDP for the federal government. The intent was clear: safeguard future generations from the burdens of excessive national debt.&amp;nbsp;&lt;/p&gt; &lt;p&gt;Germany has long been a proponent of fiscal restraint under the EU&amp;rsquo;s Maastricht rules, but its own debt brake went further than that. Despite having comparatively low and stable government debt of 60% of GDP, Germany ran substantial primary budget&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;1&lt;/span&gt;&lt;/sup&gt; surpluses between 2011 and 2020. Berlin loosened the debt brake in response to the Covid pandemic and Russia&amp;rsquo;s invasion of Ukraine, but this was only a temporary departure from fiscal discipline.&amp;nbsp;&lt;/p&gt; &lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Fiscal restraint in Germany vs largesse in the US&lt;/strong&gt;&lt;/span&gt;&lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/fiscal-restraint-in-germany-vs-largesse-in-the-us_v2.png&quot; /&gt; &lt;p&gt;The chart above contrasts that restraint with fiscal largesse in the US, with the divergence starting at the onset of the 2007-2009 Global Financial Crisis. Looser fiscal policy arguably contributed to faster economic recovery from the pandemic but also left the United States with debt-to-GDP of around 120% (although some of the debt is held by the Federal Reserve and other government agencies).&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Impact beyond growth&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;The direct growth impact of the fiscal package on German GDP will not be felt until 2026 due to implementation lags. Defence procurement has a long lead time and arguably a low multiplier of about 0.5, i.e. for &amp;euro;1 of defence spending GDP grows by &amp;euro;0.5. This is because some defence procurement will benefit military equipment producers outside of Germany. Infrastructure spending has a higher multiplier but also takes time to come to fruition. Therefore, the fiscal package will have no noticeable growth benefit this year. For 2026 and 2027, investment banks have pencilled in an increase of 0.5% to 1.0% for Germany GDP growth.&lt;/p&gt; &lt;p&gt;My own sense is that the ripple effects from the fiscal package will have an enduring impact that extends beyond 2027 and have spillover effects outside Germany. The most under-appreciated aspect is on international capital flows. Since German unification in 1991, the country has run large, growing trade surpluses and persistently exported capital abroad.&amp;nbsp; The U.S. has been a favourite destination for German and European capital. In recent years, euro area investors piled into the surging American stock market. A looser fiscal policy in Germany (and the euro area at large) will absorb a greater share of domestic production, reduce trade surpluses, and lower capital outflows. In addition, a greater sense of European solidarity may develop following the Trump administration&amp;rsquo;s foreign policy pivot, leading to &amp;ldquo;Buying European&amp;rdquo; and &amp;ldquo;Investing in Europe&amp;rdquo; movements.&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Market reaction&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;Financial markets cheered the arrival of the fiscal package. The German stock market index DAX had already outperformed global peers in 2025, but rose further on the news, as did the euro. The biggest movers by far were German government bonds (Bunds). On the day of Merz&amp;rsquo;s announcement, the yield on 10-year Bunds rose by nearly 30 basis points (see chart), the largest one-day increase since 1998. The cross-market price behaviour suggests that market participants see the fiscal package boosting German growth and inflation substantially.&amp;nbsp;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Bunds: Largest 1-day yield increase since 1998&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/bunds-largest-1day-yield-increase-since-1998_v2.png&quot; /&gt;&amp;nbsp; &lt;p&gt;For now, the rise in the German stock market and the EUR/USD exchange rate may have gone too far, too fast. The threat of new tariffs being slapped on the EU by Donald Trump on 2 April will shift attention to the short-term risks for the European economy.&amp;nbsp; A potential sell-off in European assets in response to trade war escalation would be a buying opportunity, in our view. We view capital repatriation to &lt;a href=&quot;/uk/blog/europe-bright-spot&quot;&gt;Europe as benefitting&lt;/a&gt;&amp;nbsp;euro area stocks and the euro in the long term.&amp;nbsp;&lt;/p&gt; &lt;h2 style=&quot;background: white; margin: 3.95pt 0in 11.25pt;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Germany is taking off the fiscal handbrake. It&amp;rsquo;s hard to overstate the importance of this shift. While the direct growth impact from increasing public spending will only kick in next year, the confidence and capital flow effects work immediately. Together with the U.S. administration&amp;rsquo;s foreign policy pivot, loosening the fiscal shackles is likely to lower Europe&amp;rsquo;s trade surpluses and capital exports.&amp;nbsp;&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;For markets, the impact of Germany&amp;rsquo;s fiscal shift could be most profound and enduring in international capital flows, diverting money away from U.S. capital markets and into investments in Europe.&lt;/span&gt;&lt;/p&gt; &lt;hr align=&quot;left&quot; size=&quot;1&quot; width=&quot;33%&quot; /&gt; &lt;div id=&quot;ftn1&quot;&gt; &lt;/div&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;1&lt;/sup&gt;&amp;nbsp;The cyclically adjusted primary balance is a measure of a government&#39;s fiscal position that removes the effects of the business cycle and debt interest payments, providing a potentially more accurate picture of structural fiscal health.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;Van Luu<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {38BFF860-766B-4D16-93B8-5CCEC4FC0F37}https://russellinvestments.com/uk/blog/trade-war-recession-risks-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Tariff uncertainty persists</span></li> <li><span>Canadian small-business confidence plummets</span></li> <li><span>Q1 earnings season preview</span></li> </ul>Fri, 28 Mar 2025 01:48:37 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;Tariff uncertainty is continuing&lt;/li&gt; &lt;li&gt;Canadian small-business confidence fell sharply&lt;/li&gt; &lt;li&gt;7.5% earnings growth is anticipated for U.S. Q1 earnings season&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Senior Investment Strategist and Head of Canadian Strategy, BeiChen Lin, discussed the latest tariff developments. He also revealed key watchpoints for upcoming U.S. and Canadian employment reports and finished with a preview of U.S. first-quarter earnings season. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Unanswered questions&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;The week began on an optimistic note after hints that the United States&amp;rsquo; reciprocal tariffs - slated to go into effect April 2 - might be smaller in scope. This led to a significant rally in the S&amp;amp;P 500 on Monday, Lin said, before a midweek announcement on U.S. auto tariffs caused stocks to drop again.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;Originally, investors were thinking these tariffs might not be implemented until after the reciprocal tariffs take effect. Instead, it looks like the auto tariffs will only lag the reciprocal tariffs by one day,&amp;rdquo; he remarked. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Lin stressed that the &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/volatility-vengeance-mwir&quot;&gt;tariff situation&lt;/a&gt;&lt;/span&gt;&lt;span&gt; remains very dynamic, with the possibility that things could change up to the last minute. There&amp;rsquo;s also a lot of uncertainty about how these tariffs will be applied, including the countries and products that might be taxed. In addition, other nations might retaliate by slapping their own tariffs on U.S. imports, Lin said. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Because of all these unknowns, it&amp;rsquo;s unclear &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/stagflation-lite-fed-growth-outlook&quot;&gt;how the tariff situation could impact the U.S. economy&lt;/a&gt;&lt;/span&gt;&lt;span&gt;. &amp;ldquo;Our central scenario is that the U.S. should be able to avoid a recession - but we do think recession risks are &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/dont-fear-volatility&quot;&gt;still somewhat above average&lt;/a&gt;&lt;/span&gt;&lt;span&gt;,&amp;rdquo; Lin stated. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Unemployment watch &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Turning to the labour market, Lin said both Canada and the U.S. will publish employment reports for March next week. In Canada, the unemployment rate will be a big focus due to the country&amp;rsquo;s weaker jobs market relative to the U.S., he said.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Confidence among small businesses in Canada has plummeted in recent weeks amid anxiety over U.S. tariffs, Lin noted. This is because Canada will probably be more negatively impacted than the U.S. if the tariffs remain in place for a while, he explained.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;I&amp;rsquo;ll be looking closely at the March report to see how much business anxiety weighed on job creation and the unemployment rate. If the unemployment rate comes in higher, this could bolster the case for the Bank of Canada to cut rates again next month,&amp;rdquo; Lin commented. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;In the U.S., the unemployment rate and the sectors where jobs are being created and lost will both be of interest, he said. The government sector in particular will be a key watchpoint due to the recent layoffs, Lin noted. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;So far, government layoffs haven&amp;rsquo;t had a significant impact on overall job creation numbers. This next report will show if the U.S. labour market remains resilient,&amp;rdquo; he remarked. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Earnings expectations&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin wrapped up with a peek at the upcoming first-quarter earnings season, which kicks off in mid-April. The industry consensus is for 7.5% growth on a year-over-year basis, which he said is a bit of a step down compared to the &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/themes-q4-2024-earnings-mwir&quot;&gt;fourth quarter of 2024&lt;/a&gt;&lt;/span&gt;&lt;span&gt;. However, Lin stressed that companies sometimes beat initial earnings expectations.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;This has happened a lot in recent seasons, so it&amp;rsquo;s worth watching. I&amp;rsquo;ll also be looking at what consumer-facing companies are saying about their plans to potentially adjust pricing due to recent tariff announcements,&amp;rdquo; Lin said. He concluded by emphasising that how much companies absorb price increases through their profit margins versus how much they pass along the increase to consumers will be a key focus.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/hIU_N-qg7B4&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/16876574&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;BeiChen Lin<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {40161837-3B0E-47D1-866D-2C8CFDFB799D}https://russellinvestments.com/uk/blog/germany-handbrake-off-mwir<p><strong><span>In the latest update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Fed, BoE hold rates steady</span></li> <li><span>Germany votes to change debt policy</span></li> <li><span>U.S. jobless claims tick up</span></li> </ul>Fri, 21 Mar 2025 01:50:40 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;The Federal Reserve and the Bank of England held rates steady&lt;/li&gt; &lt;li&gt;Germany voted to change its debt policy&lt;/li&gt; &lt;li&gt;U.S. jobless claims ticked up&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Director and Global Head of Solutions Strategy, Van Luu, discussed the latest rate decisions from key central banks. He also talked about fiscal reform in Germany and reviewed recent U.S. market performance.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;No cuts&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Luu began by noting the U.S. Federal Reserve (Fed) opted to leave interest rates unchanged at its March 18-19 meeting, maintaining its policy rate in a range of 4.25%-4.50%. This marked the second straight meeting where the Fed held rates steady, he said.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;The central bank&amp;rsquo;s updated economic projections suggest a &lt;/span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/stagflation-lite-fed-growth-outlook&quot;&gt;&lt;span&gt;growing risk of stagflation&lt;/span&gt;&lt;/a&gt;&lt;span&gt;,&amp;rdquo; Luu remarked, explaining that the Fed raised its forecast for inflation while lowering growth expectations. The central bank also announced it will slow the pace of its balance sheet reduction beginning in April. The Fed is doing this to avoid disruptions to markets as political negotiations to raise the U.S. debt limit play out, Luu stated. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Markets reacted positively to the Fed&amp;rsquo;s decision, he said, noting Chair Jerome Powell downplayed inflation and recession risks at the follow-up press conference. &amp;ldquo;This helped lift the mood in markets,&amp;rdquo; Luu remarked.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Shifting to the UK, he said the Bank of England (BoE) also left its key lending rate unchanged at 4.5% in an 8-1 vote. &amp;ldquo;This was a slight hawkish surprise for economists, who had expected one more voting member to join Swati Dhingra in favouring a cut,&amp;rdquo; Luu commented.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He added that both central banks attributed their wait-and-see attitude on rates to high uncertainty &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/economic-vitals-strong&quot;&gt;surrounding international trade policy&lt;/a&gt;&lt;/span&gt;&lt;span&gt;. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Looser limits&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Turning to Germany, Luu said the country&amp;rsquo;s parliament&amp;ndash;known as the Bundestag&amp;ndash;passed a constitutional amendment on Tuesday to reform its &amp;ldquo;debt brake&amp;rdquo; policy. The &amp;ldquo;debt brake&amp;rdquo; &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/german-elections-2025&quot;&gt;restricts how much money&lt;/a&gt;&lt;/span&gt;&lt;span&gt; the government can borrow. The amendment, which passed with the required two-thirds majority, will allow for much higher spending on defense, infrastructure, and environmental protection, Luu said. He added that Germany&amp;rsquo;s upper house&amp;ndash;the Bundesrat, which represents the state governments&amp;ndash;is expected to pass the legislation Friday. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;From my vantage point, this fiscal reform in Germany is very important and positive for the growth prospects of Europe&amp;rsquo;s largest economy. It resembles former European Central Bank President Mario Draghi&amp;rsquo;s &amp;ldquo;whatever it takes&amp;rdquo; attitude in 2012 when the integrity of the euro area was in doubt,&amp;rdquo; Luu remarked.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Stabilizing markets&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Luu finished with a look at recent U.S. economic data and market performance. The latest data was mostly in-line with economists&amp;rsquo; expectations, he said. &amp;ldquo;Jobless claims edged up and the Philadelphia Fed&amp;rsquo;s manufacturing index was slightly better than expected, although the outlook component of the index worsened,&amp;rdquo; he said. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Meanwhile, U.S. stock markets stabilized this week&amp;ndash;a welcome reprieve for investors after &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/volatility-vengeance-mwir&quot;&gt;last week&amp;rsquo;s decline&lt;/a&gt;&lt;/span&gt;&lt;span&gt;. Through Thursday, the S&amp;amp;P 500 was positive on the week, Luu noted.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;The respite comes as our proprietary measure of investor sentiment is suggesting oversold conditions in the U.S. stock market, which could indicate a potential buying opportunity,&amp;rdquo; Luu stated. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He concluded by adding that on the fixed income side, bond yields fell moderately and prices rose as investors were soothed by Powell&amp;rsquo;s optimistic remarks on tariff and inflation risks.&lt;/span&gt;&lt;/p&gt;Van Luu<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {04036C1F-C243-430C-A3F5-E2732B4A5775}https://russellinvestments.com/uk/blog/stagflation-lite-fed-growth-outlook<span style="letter-spacing: -0.56px;">The Federal Reserve left interest rates unchanged but ratcheted down growth forecasts as inflation concerns came to a head.</span>Thu, 20 Mar 2025 00:00:00 -0700&lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The Fed left interest rates unchanged today as widely anticipated, noting uncertainty around the economic outlook has increased. The central bank made a technical move on the balance sheet, reducing the pace of permitted runoff in its Treasury holdings from $25 to $5 billion per month. The move&amp;mdash;following a $2 trillion decline in the size of the Fed&amp;rsquo;s balance sheet from April 2022&amp;mdash;was designed to ward off a repeat of the crisis in short-term funding markets from 2019.&lt;/span&gt;&lt;/p&gt; &lt;img alt=&quot;Paul Eitelman, CFA&quot; style=&quot;width: 130px; height: 127px; float: left; margin-right: 30px; margin-bottom: 20px; margin-top: 20px;&quot; src=&quot;/-/media/images/global/headshots/a-g/eitelman-paul.png?w=130&amp;amp;h=127&amp;amp;hash=F60296297BD2AC1C5EA69BCD338C07D3&quot; /&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top: -5px;&quot;&gt;&lt;em&gt;&lt;strong&gt;&quot;The U.S. economic outlook is highly uncertain with policy whiplash jostling a solid macro foundation. We&amp;rsquo;re looking for more clarity on the path forward for trade policy on April 2.&quot;&lt;/strong&gt;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;Paul Eitelman, CFA&lt;/strong&gt;&lt;br /&gt; Senior Director, Chief Investment Strategist&lt;br /&gt; Russell Investments&lt;/p&gt; &lt;hr /&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Stagflation Lite&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The changes to the Fed&amp;rsquo;s economic outlook were stagflation-lite. Expected growth in 2025 was revised down from 2.1% to 1.7%&amp;mdash;not a recession but weaker. And core PCE inflation was revised up from 2.5% to 2.8%. The dot plot forecasts for the federal funds rate moved up slightly in a hawkish direction but not by enough to jostle the median expectation for two rate cuts this year&amp;mdash;matching our own baseline scenario for reductions in both June and December.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Transitory tariff inflation?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Our focal point for today&amp;rsquo;s FOMC meeting was how Chair Powell and company were thinking about the intersection of trade policy and monetary policy. Powell gave the textbook answer, saying the central bank could look through tariff-driven inflation if long-term inflation expectations remain well anchored.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Markets seemed to take Powell&amp;rsquo;s notion of &amp;ldquo;transitory&amp;rdquo; tariff-driven inflation as a dovish outcome. We weren&amp;rsquo;t particularly surprised by the tenor of that discussion or of today&amp;rsquo;s press conference as a whole, but Fed pricing moved down slightly (chart) and U.S. equities rebounded, with the S&amp;amp;P 500 trading almost 1.75% higher at noon Pacific time.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;&lt;em&gt;Market projections for short-term rates tick lower after Fed meeting&lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/eitelman319rates.jpg&quot;&gt;&lt;img alt=&quot;Rate expectations&quot; src=&quot;/-/media/images/global/blogs/images/eitelman319rates.jpg&quot; /&gt;&lt;/a&gt;&lt;/em&gt;&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Source: Russell Investments, LSEG Eikon, March 19, 2025.&lt;/span&gt;&lt;/em&gt; &lt;hr /&gt; &lt;p&gt; &lt;/p&gt; &lt;h2&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt; The U.S. economic outlook is highly uncertain with &lt;a href=&quot;/uk/blog/economic-vitals-strong&quot;&gt;policy whiplash&lt;/a&gt;&amp;nbsp;jostling a solid macro foundation. We&amp;rsquo;re looking for more clarity on the path forward for trade policy on April 2.&amp;nbsp;&lt;/p&gt; &lt;p&gt;Right now, we are seeing some risk aversion in the stock market. However, the decline &lt;a href=&quot;/uk/blog/volatility-vengeance-mwir&quot;&gt;hasn&amp;rsquo;t been significant enough for us&lt;/a&gt;&amp;nbsp;to say we&amp;rsquo;ve reached an unsustainable extreme of panic&amp;mdash;a threshold that could warrant a more material change in our dynamic positioning.&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;Paul Eitelman<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {F5451FA1-5491-4257-83B6-9771BB461312}https://russellinvestments.com/uk/blog/thinking-about-market-timing-today<span style="letter-spacing: -0.56px;">The recent increase in market volatility has stirred up questions about moving out of the market for the safety of cash. Check out these key considerations before doing so.</span>Thu, 20 Mar 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key Takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;Market timing is difficult and not the type of behavior we would encourage for most advisors and investors.&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;A historical perspective on how frequently portfolios have lost money may help investors remain invested.&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;We also suggest some key considerations to discuss with investors contemplating a move to cash.&lt;/li&gt; &lt;/ul&gt; &lt;hr align=&quot;left&quot; size=&quot;1&quot; width=&quot;33%&quot; /&gt; &lt;p&gt;In recent weeks, how many times have you fielded the question &amp;ldquo;Should I be moving to cash?&amp;rdquo; Or maybe it&amp;rsquo;s come in the form of a bold (panicked?) statement &amp;ldquo;I need to move to cash.&amp;rdquo;&lt;/p&gt; &lt;p&gt;We have certainly seen an uptick in this sentiment accompanying the &lt;a href=&quot;/us/blog/volatility-vengeance-mwir&quot;&gt;increase in market volatility&lt;/a&gt; since the start of the year.&lt;/p&gt; &lt;p&gt;Skittish investors are eyeing current rates on Certificates of Deposit (CD) and thinking &amp;ldquo;A 3% to 4% return looks pretty attractive relative to a market correction.&amp;rdquo;&lt;/p&gt; &lt;p&gt;So that begs the question: Are investors best served by abandoning their long-term allocations to move to the safety, but limited return potential of &lt;a href=&quot;/us/blog/the-hidden-costs-of-carrying-cash&quot;&gt;cash&lt;/a&gt;? It&amp;rsquo;s never been easy to correctly time markets&amp;mdash;but is this time different?&lt;/p&gt; &lt;p&gt;Let&amp;rsquo;s &lt;a href=&quot;/us/blog/tips-advisors-stay-calm&quot;&gt;put emotions aside&lt;/a&gt; for a minute and look at some historical perspective to &lt;a href=&quot;/404 error page?item=web%3a%7b22B07EE3-1A28-4F7A-B5E0-C604456E7C1C%7d%40en-GB&quot;&gt;help investors&lt;/a&gt; wrestling with the notion of exiting the market.&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;What to think about&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;Before considering a move to cash, investors should assess a few factors:&lt;/p&gt; &lt;ul&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;How frequently have markets and portfolios turned negative&amp;mdash;and stayed negative?&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;How confident are you about the &amp;ldquo;sell&amp;rdquo; signal and how will it feel if you&amp;rsquo;re wrong?&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;It&amp;rsquo;s true that capital markets produce periods of high volatility and negative results for investors. However, those periods tend to be short-lived and reverse fairly quickly as demonstrated by the calendar year results shown below. This histogram shows that over the last 45 years, a balanced 60% equities/40% fixed income index portfolio has produced negative results in only seven of those years. In other words, a balanced portfolio has had positive results in 38 of the 45 calendar years (84%). And in the case of the most negative years, such as 2008 and 2022, they were followed by strong positive years.&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;Additionally, over the last 45 years there have only been a few times that negative investor returns stretched beyond 12 months. To attempt to correctly, and consistently, time those narrow windows of negative results is a difficult task.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Click image to enlarge&lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/chart-1-q4-emr.webp&quot; target=&quot;_blank&quot;&gt;&lt;img alt=&quot;Marginal income tax rates&quot; src=&quot;/-/media/images/global/blogs/images/chart-1-q4-emr.webp&quot; /&gt;&lt;/a&gt;&lt;br /&gt; &lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;em&gt;Index portfolio of 40% Russell 3000 Index, 20% MSCI EAFE Index, and 40% Bloomberg US Gov/Corporate Bond Index. Index returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. Indexes are unmanaged and cannot be invested in directly.&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;To address the &amp;ldquo;sure it&amp;rsquo;s a narrow window, but this is a clear sell signal&amp;rdquo; argument, let&amp;rsquo;s review a couple historical signals that were &amp;ldquo;obvious&amp;rdquo; sell warnings and their eventual outcomes.&amp;nbsp;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Market timing signal&amp;mdash;Exhibit A: The Global Pandemic&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;The most recent clear &amp;ldquo;sell&amp;rsquo; signal was the COVID outbreak of early 2020. The global economy shut down and the outlook for stocks turned grim early. The stock market started pulling back in February and by the end of the first quarter, stocks were down more than 20%. With so many unknowns, many fearful investors withdrew and parked cash on the sidelines. Unfortunately, this meant these investors missed much, if not all, of the market bounce off the bottom as stocks rallied by 45% over the last nine months of the year. The year of the COVID outbreak produced a 20%+ stock market return!&lt;/p&gt; &lt;p&gt;How could a one-in-a-hundred years pandemic, which caused historically high unemployment and a global recession, not be a sell signal? It wasn&amp;rsquo;t, and in fact, the 2020 stock market return of 20+% was followed by a 2021 that produced a return of 25+%. Anyone who interpreted the pandemic as an obvious &amp;ldquo;sell&amp;rdquo; signal by removing money from the stock market, missed out on some strong portfolio returns.&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Market timing signal&amp;mdash;Exhibit B: When Lehman Brothers declared bankruptcy in September 2008&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;Remember the Great Financial Crisis? At the time, when Lehman Brothers surprisingly declared bankruptcy, that certainly seemed like a sell signal. Or was it?&lt;/p&gt; &lt;p&gt;Investors who experienced the bankruptcy and decided to get out of the market on September 30, 2008, missed out on a 4.4% gain over the following 12 months (ending September 2009). Yes, there was a significant equity market drawdown in that window, but investors who stayed invested profited from the 2009 market rally. Many of the investors who bailed after the Lehman bankruptcy stayed out too long and didn&amp;rsquo;t benefit from the historic recovery.&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Market timing signal&amp;mdash;Exhibit C: The inverted yield curve&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;A market &amp;ldquo;signal&amp;rdquo; that occurs more frequently than a global pandemic or a historic economic crisis is an inverted yield curve. This occurrence is mainly associated with predicting an economic recession, but recessions and market corrections tend to go hand-in-hand.&lt;/p&gt; &lt;p&gt;This &amp;ldquo;signal&amp;rdquo; sounded five times between 1980 and 2019 and in each case a recession&amp;mdash;typically accompanied by a significant equity correction&amp;mdash;followed. These recessions have taken place anywhere from five months to 24 months after the curve initially inverts&amp;mdash;and even during recessions, markets often experience periods of positive returns that should not be missed.&lt;/p&gt; &lt;p&gt;So, an inverted yield curve may not be an immediate market signal despite its recession warning capability. In fact, actual historical results suggest the inverted yield curve may not give much of a market warning signal at all.&lt;/p&gt; &lt;p&gt;On average, the measured time periods above following inversions have produced positive returns. The first six months have typically produced higher than average results, hardly an indicator to &amp;ldquo;get out&amp;rdquo; of the market. Expanding beyond one year generally produces positive stock and bond returns. More conversative allocations do better over three years while more aggressive portfolios do better over five years. This is likely the result of bonds getting an intermediate post-inversion boost as interest rates are lowered to combat economic slowing and stocks retreat due to that same economic slowing. Regardless, the hypothetical index portfolios have appeared to recover quickly and post positive results on average following yield curve inversions.&lt;/p&gt; &lt;p&gt;The Global Pandemic and Lehman Brothers bankruptcy and the inverted yield curve scenarios, all &amp;ldquo;strong&amp;rdquo; sell signals, are just two examples that indicate timing cash moves around market or economic events can be difficult. Conditions or events that investors may view as clear &amp;ldquo;Get Out&amp;rdquo; signals can be cloudier than you may think.&lt;/p&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Click image to enlarge&lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/chart-market-timing-2025.webp&quot; target=&quot;_blank&quot;&gt;&lt;img alt=&quot;Marginal income tax rates&quot; src=&quot;/-/media/images/global/blogs/images/chart-market-timing-2025.webp&quot; /&gt;&lt;/a&gt;&lt;br /&gt; &lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;em&gt;Source: Bloomberg, FTSE&lt;br /&gt; Note: Hypothetical analysis provided for illustrative purposes only.&lt;br /&gt; 1Diversified Portfolios: Two Index Portfolios Comprised of Russell 1000 Index (R1000), and Bloomberg U.S. Aggregate Bond Index (AGG); 30% Equity: 30% R1000/70%AGG, 50% Equity: 50% R1000/50% AGG, 70% Equity: 70% R1000/30%AGG&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;The recent increase in market volatility has appeared to stir up questions about moving out of the market for the safety of cash. We caution &lt;a href=&quot;/404 error page?item=web%3a%7bEBC3D204-6A0F-4213-8206-B9CCAFF85E11%7d%40en-GB&quot;&gt;against market timing for most investors&lt;/a&gt; because that decision is often not rewarded. If investors ignore this and insist on &amp;ldquo;doing something&amp;rdquo; in the face of perceived increasing risk, one idea you could pursue is to convince them to temporarily reduce market exposure.&lt;/p&gt; &lt;p&gt;Reducing their equity allocation by 10% to 20% may provide additional cushion if the market does pull back and still allow for participation if markets snap back quickly or don&amp;rsquo;t drawdown at all.&lt;/p&gt; &lt;p&gt;One final consideration for those contemplating this path is to document the reasons for getting out and the catalyst for getting back in. These decisions are &lt;a href=&quot;/404 error page?item=web%3a%7b264A1B34-2275-49EA-97DC-C2515F74D700%7d%40en-GB&quot;&gt;often driven by emotions&lt;/a&gt; and not by a long-term perspective, so having a written plan in place may help improve the odds of success or mitigate the amount of harm made by a bad call.&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;Mike Smith<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {69DDC761-0A13-4C97-983F-BE09EFE4A703}https://russellinvestments.com/uk/blog/volatility-vengeance-mwir<p><strong><span>In the latest update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Tariff uncertainty batters markets</span></li> <li><span>U.S. inflation slows</span></li> <li><span>Investor sentiment nears oversold levels</span></li> </ul>Thu, 13 Mar 2025 01:56:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;Tariff uncertainty is spooking markets&lt;/li&gt; &lt;li&gt;U.S. inflation slowed in February&lt;/li&gt; &lt;li&gt;Investor sentiment is nearing oversold levels&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Director and Senior Investment Strategist Alex Cousley discussed recent developments in the trade war and the impact on markets. He also dug into the latest U.S. economic data and provided an update on investor sentiment.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Tariff whiplash&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Cousley began by noting that market volatility intensified this week, with investors trading on each new tariff headline.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;The week got off to a &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/dont-fear-volatility&quot;&gt;rocky start&lt;/a&gt;&lt;/span&gt;&lt;span&gt; after U.S. President Donald Trump said he couldn&amp;rsquo;t rule out a recession sparked by the escalating trade war. This was later followed by the president noting that he doesn&amp;rsquo;t think a recession is likely. Following that, markets were repeatedly jolted by tariff announcements as the week progressed, Cousley said. These included the United States&amp;rsquo; decision to raise tariffs on Chinese imports and implement a 25% tariff on all steel and aluminum goods from other countries. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;China, the European Union (EU), and Canada all swiftly responded by slapping tariffs on U.S. imports, Cousley noted. &amp;ldquo;China retaliated by increasing tariffs on U.S. agricultural goods - similar to how it responded to U.S. tariffs in 2018-19. Meanwhile, the EU and Canada also struck back with retaliatory tariffs targeting a broad range of American goods,&amp;rdquo; he explained. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Cousley said that the current slate of tariffs could have a modest impact on U.S. economic growth, with one of Russell Investments&amp;rsquo; models estimating a 0.4% hit to GDP (gross domestic product). &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Encouraging economic numbers&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p style=&quot;margin-bottom: 8pt; line-height: 115%;&quot;&gt;&lt;span&gt;Pivoting to economic data, Cousley said the latest JOLTS (Job Openings and Labor Turnover Survey) report provided some encouraging news. &amp;ldquo;The report showed that U.S. job openings ticked up during January, while the so-called &lt;em&gt;quit rate&lt;/em&gt; - the percentage of individuals who voluntarily left their jobs - also edged higher. These are both healthy signs for the economy,&amp;rdquo; he remarked. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;margin-bottom: 8pt; line-height: 115%;&quot;&gt;&lt;span&gt;Meanwhile, &lt;/span&gt;&lt;span&gt;U.S. inflation slowed to 0.2% during February&lt;/span&gt;&lt;span&gt; - coming in slightly below consensus expectations. Cousley said that price changes in rent, autos, insurance, and airfare were key drivers behind the softer numbers. &amp;ldquo;While these sectors don&amp;rsquo;t have much of an impact on the U.S. Federal Reserve&amp;rsquo;s (Fed) preferred measure of inflation - the core PCE price index - this is an encouraging trend nonetheless,&amp;rdquo; he remarked. Cousley added that the numbers could also help strengthen the case for additional rate cuts in the second half of the year.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Souring sentiment&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Cousley finished with a look at how market volatility is impacting investor attitudes. He said that Russell Investments&amp;rsquo; proprietary measure of investor sentiment is showing further signs of reaching oversold levels. In addition, the latest Investors Intelligence survey - which tracks the sentiment of investment newsletter writers - showed there are more writers with a bearish market view than writers with a bullish one. &amp;ldquo;This is a relatively rare phenomenon,&amp;rdquo; Cousley noted.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He said that Russell Investments is paying close attention to changes in investor sentiment as well as the business cycle outlook. &amp;ldquo;We&amp;rsquo;re monitoring both for opportunities to incrementally add risk to our portfolios following the recent selloff, but we don&amp;rsquo;t think the market has crossed that threshold yet,&amp;rdquo; Cousley concluded.&lt;/span&gt;&lt;/p&gt; Alexander Cousley<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {4BEB3A75-E228-416D-846A-0F9F91F91FC1}https://russellinvestments.com/uk/blog/canada-election-debrief<span style="letter-spacing: -0.56px;">Senior Investment Strategist and Head of Canadian Strategy, BeiChen Lin, explains how the results of Canada’s federal elections may shape legislative and monetary policies in the months to come.</span>Thu, 13 Mar 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;While one election has wrapped up, the next one might be underway soon. Mark Carney is expected to be sworn in on Friday as the next prime minister, and potentially call for a federal election.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Canada&amp;rsquo;s economy is likely to remain under pressure, with elevated uncertainty persisting.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Interest rates could fall much more than what the market expects.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Fiscal policy could be a mixed bag, irrespective of who forms the next government.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;We continue to believe Canadian investors will likely benefit from sticking to a long-term framework in their portfolios.&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The Liberal Party of Canada has wrapped up its leadership race, with Mark Carney winning by an overwhelming margin. He&amp;rsquo;s expected to be officially sworn in as the next prime minister this Friday, replacing Justin Trudeau. But despite one electoral race wrapping up, the era of uncertainty in Canada may continue.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Another election?&lt;/strong&gt;&lt;/h2&gt; &lt;strong&gt;&lt;/strong&gt; &lt;h2&gt; &lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Even though the Liberal Party of Canada has just wrapped up its election, another election could soon be underway in Canada. Unlike in the U.S., Canada&amp;rsquo;s parliamentary system does not impose a &lt;em&gt;fixed date&lt;/em&gt; for federal elections. Rather, Canada sets a &lt;em&gt;maximum gap &lt;/em&gt;between when consecutive elections must be held. For Canada, this means that the election must be held before October 20, 2025. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;But the next election might come much sooner than that. The latest Nanos polling suggests that the Liberal party now trails the Conservative Party by only one percentage point&amp;mdash;well within the margin of error. Mark Carney may opt to capitalize on the newfound momentum of the Liberal Party, and call an early election. With a minimum required campaigning period of just 37 days, Canadians could head to the polls as early as April. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The tight race means predicting the winner of the next election will be challenging. And regardless of which party takes the helm, chances are it will be a minority government, meaning that legislative compromises will be necessary. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Yelling &amp;ldquo;cut&amp;rdquo;&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;First, let&amp;rsquo;s start with the good news: Canadians may see some tax relief soon. That&amp;rsquo;s because both Pierre Poilievre (the leader of the Conservative Party) and Mark Carney have spoken out in favor of eliminating Canada&amp;rsquo;s carbon tax. While it can be tough to estimate the &lt;em&gt;magnitude &lt;/em&gt;of the impact, &lt;em&gt;directionally&lt;/em&gt; the lifting of the tax should help boost growth. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In addition, both Carney and Poilievre have indicated that they want to permanently axe the temporarily suspended plan to increase the capital gains inclusion rate. With the capital gains inclusion rate now remaining unchanged, it means that Canadians will no longer have to contend with an increase in the effective rate of tax on capital gains. &amp;nbsp;&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;But taxes aren&amp;rsquo;t the only thing on the chopping block. Both Poilievre and Carney have spoken out in favor of fiscal restraint, and suggested that they may seek to cut government spending. So where will fiscal policy end up? Canadians might have to wait for the next federal budget to find out. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Trade tensions linger &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Canada and the U.S. are still embroiled in a &lt;/span&gt;&lt;a href=&quot;/uk/blog/dont-fear-volatility&quot;&gt;trade standoff&lt;/a&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;. As of mid-March, the U.S. has imposed 25% tariffs on Canadian steel and aluminum, as well as on goods that are not covered by the Canada-United States-Mexico Agreement (CUSMA). Meanwhile, Canada has responded with retaliatory tariffs on a subset of its imports from the U.S. &lt;br /&gt; &lt;br /&gt; The situation continues to remain fluid. On the one hand, Canada could see &lt;/span&gt;&lt;a href=&quot;/uk/blog/tariff-uncertainty-markets-mwir&quot;&gt;even more tariffs imposed in early April&lt;/a&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, if the U.S. proceeds with tariffs on all Canadian imports after the exemption for CUSMA-covered goods lapses. And in addition, the U.S. could announce more tariffs as a part of its &amp;ldquo;reciprocal tariff plans.&amp;rdquo; &lt;br /&gt; &lt;br /&gt; On the other hand, perhaps Canada and the U.S. may eventually reach a deal to settle the trade standoff. But even if a deal is reached, the exact parameters could still differ from the previous terms of trade. With the CUSMA up for renegotiation soon, it&amp;rsquo;s possible that the new CUSMA may apply to a smaller proportion of goods.&lt;br /&gt; &lt;br /&gt; We continue to believe that Canada may be &lt;/span&gt;&lt;a href=&quot;/uk/blog/rba-lowers-rates-mwir&quot;&gt;more adversely impacted by a protracted trade standoff&lt;/a&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; than the U.S., in large part because Canada is much more reliant on U.S. exports than vice-versa. Should the trade standoff persist, the Canadian economy could face a significant likelihood of tipping into a recession. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Interest rate uncertainty &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The Bank of Canada (BoC) has now already cut rates at seven consecutive meetings. But the resting point for interest rates is still uncertain. Although markets currently anticipate that interest rates will settle at around 2.3% by the end of 2025, the BoC&amp;rsquo;s decision will ultimately be guided by the incoming economic data. With the Canadian unemployment rate still more than 1.5 percentage points above its 2023 low, we&amp;rsquo;ve already seen some signs of economic fragility in Canada. And if a deeper economic slowdown were to take hold, the Bank of Canada may have to cut rates quite aggressively to stabilize the economy. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/linchartmar12.jpg&quot;&gt;&lt;img alt=&quot;Canadian vs US unemployment rate&quot; src=&quot;/-/media/images/global/blogs/images/linchartmar12.jpg?h=456&amp;amp;w=500&amp;amp;hash=7BE9901237B2C87E45512449A3CAA120&quot; style=&quot;width: 500px; height: 456px;&quot; /&gt;&lt;/a&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Staying the course&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Despite the significant economic risks and heightened uncertainty, we still believe that staying the course may be the most prudent way of navigating these challenges. Unless markets take a significant turn for the worse, we think investors may benefit from sticking close to their strategic asset allocations and letting security selection be the main source of risk.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;BeiChen Lin<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {89BE5EC3-E883-4FAF-AFB3-B16E35DF8175}https://russellinvestments.com/uk/blog/economic-vitals-strong<span style="letter-spacing: -0.56px;">The latest inflation numbers suggest the U.S. economy is still chugging along despite the recent trade turmoil, Paul Eitelman writes.</span>Thu, 13 Mar 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;Stocks rebounded on Wednesday as core inflation in the United States came in below consensus expectations and news of a possible 30-day truce in the Russia-Ukraine war emerged. Big tech stocks also recovered after flirting with bear-market territory earlier this week.&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Tariff tension&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;Extreme trade policy uncertainty continues to be a theme investors are grappling with. We don&#39;t know if the U.S. administration is focused more on pursuing better trade deals or transforming trade policy altogether. Comments from Commerce Secretary Howard Lutnick overnight suggest both are at play. &lt;/p&gt; &lt;p&gt;What Russell Investments is doing:&lt;/p&gt; &lt;ol&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Examining the fundamentals of the U.S. economy to see how it might weather elevated policy uncertainty&lt;/li&gt; &lt;li&gt;Assessing the risk aversion of other investors to see if there are potential opportunities&lt;/li&gt; &lt;/ol&gt; &lt;h2&gt;&lt;strong&gt;Inflation softens&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;The good news? The latest data continues to suggest the U.S. economy remains on a solid foundation. &lt;/p&gt; &lt;p&gt;The inflation numbers today were encouraging, with the closely watched core CPI report undershooting consensus expectations. We continue to think moderating rent and wage pressures will allow inflation to ease further. And a deeper look at product-level price increases suggests the inflation picture is starting to look more normal&amp;mdash;like the pre-COVID period.&lt;/p&gt; &lt;hr /&gt; &lt;img alt=&quot;Paul Eitelman, CFA&quot; style=&quot;width: 130px; height: 127px; float: left; margin-right: 30px; margin-bottom: 20px; margin-top: 20px;&quot; src=&quot;/-/media/images/global/headshots/a-g/eitelman-paul.png?w=130&amp;amp;h=127&amp;amp;hash=F60296297BD2AC1C5EA69BCD338C07D3&quot; /&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top: -5px;&quot;&gt;&lt;em&gt;&lt;strong&gt;&quot;A full-throttle trade war could slow&amp;mdash;or even reverse&amp;mdash;recent progress, with some of our scenarios showing core inflation reaccelerating to 3% or higher by year-end.&quot;&lt;/strong&gt;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;Paul Eitelman, CFA&lt;/strong&gt;&lt;br /&gt; Senior Director, Chief Investment Strategist&lt;br /&gt; Russell Investments&lt;/p&gt; &lt;hr /&gt; &lt;p&gt; &lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Trade war risks&lt;/strong&gt;&lt;/h2&gt; Trade policy remains a key risk to the inflation outlook, although it&#39;s too early to see a material impact in February&#39;s report. But a full-throttle trade war could slow&amp;mdash;or even reverse&amp;mdash;recent progress, with some of our scenarios showing core inflation reaccelerating to 3% or higher by year-end. Trade policy and the next few months of inflation data will help shine a brighter light on these trends. Meanwhile, amid questions of a possible pullback in consumer spending, data from select credit card companies suggests spending is still chugging along. Again, the next few months will be key. &lt;p&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/eitelman312p_1.jpg&quot;&gt;&lt;img alt=&quot;Price inflation&quot; src=&quot;/-/media/images/global/blogs/images/eitelman312p_1.jpg&quot; /&gt;&lt;/a&gt;&lt;/p&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Bears top bulls&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;Finally, on market psychology, the Investor Intelligence survey of newsletter writers showed more bears than bulls today&amp;mdash;a rare occurrence that&#39;s provided a useful buying signal around recent market bottoms.&lt;/p&gt; &lt;p&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/eitelman312p_2.jpg&quot;&gt;&lt;img alt=&quot;Investor survey&quot; src=&quot;/-/media/images/global/blogs/images/eitelman312p_2.jpg&quot; /&gt;&lt;/a&gt;&lt;/p&gt; &lt;p&gt;While there&#39;s no guarantee we are at a market bottom right now, it&#39;s important to remember that moments of uncertainty and risk aversion in markets are &lt;a href=&quot;/uk/blog/dont-fear-volatility&quot;&gt;often periods that ultimately reward long-term investors&lt;/a&gt;&amp;nbsp;for sticking to their strategic plan.&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;Paul Eitelman<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {6F326F4B-3FB9-4C65-8D9B-396CAA4E31C9}https://russellinvestments.com/uk/blog/dont-fear-volatility<span style="letter-spacing: -0.56px;">New tariffs have shaken the stock market, pushing it into correction territory, but recessions fears may be overblown, writes BeiChen Lin.</span>Wed, 12 Mar 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 16px;&quot;&gt;Warmer weather means that many animals come out of hibernation. Unfortunately for investors, market bears have also awakened from their slumber.&lt;/span&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 16px;&quot;&gt;The recent selloff in U.S. stocks continued this week, with the S&amp;amp;P 500 dropping by nearly 3% on Monday, and nearly an additional percentage point today. With the recent market moves, the stock market has now fallen nearly 10% below its all-time highs.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Recession fears resurface&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;a href=&quot;/uk/blog/tariff-uncertainty-markets-mwir&quot;&gt;Trade policy uncertainty&lt;/a&gt; has stirred more anxiety around U.S. growth projections. In recent days, there has been a noticeable spike in the amount of &quot;recession&quot; related searches on the internet. &lt;/p&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;&lt;em&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;The dreaded R-word&lt;/span&gt;&lt;/em&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/lintariff_1.jpg&quot;&gt;&lt;img alt=&quot;Recession searches&quot; src=&quot;/-/media/images/global/blogs/images/lintariff_1.jpg&quot; /&gt;&lt;/a&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;em&gt;Source: Google trends&lt;/em&gt;&lt;/p&gt; &lt;p&gt;Still, our U.S. recession risk dashboard paints a more encouraging picture, especially compared to 2023. We are entering these turbulent times from a starting point of resilience. Against that backdrop, we think the risk of a U.S. recession occurring sometime over the next 12 months is 30%. Although the risk of a recession is still above-average, our base case still calls for the United States to achieve a soft landing. That&#39;s likely to be true even if the currently announced tariff measures remain in place for an extended period of time&amp;mdash;although U.S. growth could slow modestly in that case.&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;&lt;em&gt;U.S. recession risk dashboard&lt;/em&gt;&lt;/strong&gt;&lt;/p&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/lindashboard.jpg&quot;&gt;&lt;img alt=&quot;Dashboard&quot; src=&quot;/-/media/images/global/blogs/images/lindashboard.jpg&quot; /&gt;&lt;/a&gt;&amp;nbsp; &lt;p class=&quot;deci&quot;&gt;&lt;em&gt;Source: Russell Investments, March 2025. Red represents areas of high risk. Orange and yellow represent areas of intermediate risk. Green represents areas of low risk.&lt;/em&gt;&lt;/p&gt; &lt;hr /&gt; &lt;img alt=&quot;BeiChen Lin&quot; style=&quot;width: 130px; height: 127px; float: left; margin-right: 30px;&quot; src=&quot;/-/media/images/global/headshots/h-q/lin-beichen.webp?w=130&amp;amp;h=127&amp;amp;hash=BD4DA9433FA5C0E53504D13FCABD73AF&quot; /&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top: -5px;&quot;&gt;&lt;em&gt;&lt;strong&gt;While stock-market drawdowns might be difficult to stomach, volatility is normal.&lt;/strong&gt;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;BeiChen Lin, CFA, CPA&lt;/strong&gt;&lt;br /&gt; Senior Investment Strategist, Head of Canadian Strategy&lt;br /&gt; Russell Investments&lt;/p&gt; &lt;hr /&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Oversold sentiment&lt;/strong&gt; &lt;/p&gt; &lt;p&gt;The U.S. stock market selloff has resulted in investor sentiment becoming noticeably oversold. Our sentiment indicator now stands at +1.7&lt;strong&gt; &lt;/strong&gt;standard deviations, reaching levels last seen in December 2022.&lt;/p&gt; &lt;p&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/lintariff_3.jpg&quot;&gt;&lt;img alt=&quot;Composite contrarian indicator&quot; src=&quot;/-/media/images/global/blogs/images/lintariff_3.jpg&quot; /&gt;&lt;/a&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;em&gt;Source: Russell Investments, as of March 10, 2025&lt;/em&gt;&lt;/p&gt; &lt;p&gt;But historically, U.S. equities have rebounded roughly 11% over the next 12 months once sentiment gets to these levels. And, if sentiment reaches a panic, that return improves to roughly 20%.&lt;/p&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Gut check&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;While stock-market drawdowns might be difficult to stomach, &lt;a href=&quot;/-/media/files/global/insights/keepcalm2025.pdf&quot; target=&quot;_blank&quot;&gt;volatility is normal&lt;/a&gt;. In the past 60-plus years, markets have seen 9% drawdowns roughly half of the time. But following those drawdowns, investors who stick to their plan are often rewarded with double-digit gains.&amp;nbsp;&lt;/p&gt; &lt;p&gt;However, there is a risk that this time could be different. While we believe President Trump&#39;s trade policy is aimed at reinvigorating the U.S. manufacturing sector and may be part of his negotiation strategy, there is still a lot of uncertainty around where these policies will settle. A prolonged trade standoff may eventually dampen business and consumer activity to the point where economic growth slows meaningfully.&amp;nbsp;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;em&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/lintariif_4.jpg&quot;&gt;&lt;img alt=&quot;Pullbacks&quot; src=&quot;/-/media/images/global/blogs/images/lintariif_4.jpg&quot; /&gt;&lt;/a&gt;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;em&gt;Source: U.S. Equity: Russell 3000 Index. as of 12/31/2024. Source: Morningstar. Returns calculated with dividends included. Maximum peak-to-trough represents the return difference between the peak and trough during the calendar year. Index returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. Indexes are unmanaged and cannot be invested in directly.&lt;/em&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;Russell Investments continues to monitor this fluid situation closely and will adjust portfolios as warranted. If the selloff continues and U.S. equity valuations improve, we may consider potentially adding incremental risk to the portfolios. For now, we continue to believe that staying invested, rather than going to cash, could be the most prudent course of action.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;BeiChen Lin<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {059FF533-5930-42B8-9F3E-A5E912AC2677}https://russellinvestments.com/uk/blog/europe-bright-spotOur chief investment strategist shares why he’s optimistic about the outlook for European markets.<br />Wed, 12 Mar 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;European equities have outperformed U.S. equities since the start of 2025.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Increased bank lending, easing inflation and a boost to the German economy are some of the key reasons behind this.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;The escalating trade war with the U.S. could derail some of this progress, but for now, we&amp;rsquo;re cautiously optimistic on Europe.&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;News headlines this week have been dominated by recession fears in the U.S., with the S&amp;amp;P 500 and the Magnificent 7 shedding value. Yet, amid this rising uncertainty, a positive story is emerging - the performance of European markets.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;For years, European equities have been viewed as slow-moving and overshadowed by the U.S., but current performance tells a more positive story. Since the start of the year European equities have outperformed the U.S. market, with the MSCI European Monetary Union index up +8.6% YTD vs a -5% decline in the S&amp;amp;P 500.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/us_vs_equities_returns.png&quot; /&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Europe&amp;rsquo;s markets are demonstrating resilience, with a variety of factors contributing to the improved outlook, albeit with a few significant headwinds:&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;European tailwinds&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Germany&#39;s fiscal shift: &lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Post-election changes in Germany have led to optimism in what has been a stagnant European economy in recent years. German government efforts to bypass the &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/uk/blog/german-elections-2025&quot;&gt;debt brake&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; and establish a &lt;/span&gt;&lt;a href=&quot;https://www.reuters.com/world/europe/germanys-conservatives-spd-meet-talks-coalition-major-spending-hike-eyed-2025-03-04/&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&amp;euro;500 billion infrastructure plan&lt;/span&gt;&lt;/a&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, could help contribute to growth and create investment opportunities in the region.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Favourable policy environment: &lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The European Central Bank has been the most aggressive globally at &lt;/span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/tariff-uncertainty-markets-mwir&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;rate easing&lt;/span&gt;&lt;/a&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, with a corresponding surge in bank lending. The chart below illustrates how bank lending to households and non-financial businesses has trended upwards since late 2023, which is a positive indicator for business growth.&lt;/span&gt;&lt;/p&gt; &lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/bank-lending-to-households--nonfinancial-business.png&quot; /&gt;&amp;nbsp; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Defence spending: &lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Plans to increase defence budgets, potentially funded by joint bonds, could strengthen European economic cohesion and create investment opportunities.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Falling inflation: &lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Core inflation in Europe is now largely in&lt;strong&gt; &lt;/strong&gt;line with that of the U.S. While European gas prices remain ~3x higher than U.S. prices, they have come down since 2022. Price decreases could be further supported by a potential ceasefire in Ukraine.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;European headwinds&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;However, despite reasons for optimism, there are significant headwinds that could undermine Europe&amp;rsquo;s growth story:&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;U.S. trade war: &lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/uk/blog/tariff-uncertainty-markets-mwir&quot;&gt;U.S. tariffs&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; could cut Europe&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;an GDP by ~0.5%, which is significant given the low 1% GDP growth consensus. European exports to the U.S. represent only around 3% of the Eurozone&#39;s GDP, but the overall exposure to global trade is much larger. With Europe reliant on exports, any significant tariff-related disruptions, both European-specific or globally, could have a meaningful economic impact.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Fiscal deficits&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;: While countries such as Germany have increased fiscal space, this is not the case for all European countries.&lt;strong&gt; &lt;/strong&gt;For instance,&lt;strong&gt; &lt;/strong&gt;France&amp;rsquo;s high deficit (~6% of GDP) limits its fiscal flexibility, creating potential risks for broader European stability.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The bottom line&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;There&amp;rsquo;s reason to be cautiously optimistic in Europe. We&amp;rsquo;ll need to see how the trade war plays out, but the uptick in bank lending is a positive sign. After a tough decade, Europe is showing signs of resilience and renewed optimism. The big question now is whether this can last.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;Andrew Pease<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {AD654157-7EC4-4704-9E75-8A071E28D71D}https://russellinvestments.com/uk/blog/manager-views-ipo-environment<p style="line-height: normal;"><span>Leveraging our unique relationship with underlying managers, we share their insights on the current state of the IPO market—and what it might take for more companies to go public.</span></p>Tue, 11 Mar 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Strong returns in U.S. stocks, particularly over the past two plus years, have led investors to question the relative lack of companies going public via the IPO process - as well as the potential implications for the IPO market in the long term.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;According to active equity managers, a combination of increased public market regulation, a reduced pipeline of potential offerings following the prior boom, the rising role of large private asset managers in capital raising, and near-term uncertainty&amp;nbsp;surrounding government policy are all contributing factors.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;At Russell Investments, we think investors benefit from taking a long-term view. We construct portfolios with this in mind, building in the right blend of &lt;a href=&quot;https://russellinvestments.com/uk/blog/small-cap-exposure-still-good-idea&quot;&gt;public&lt;/a&gt;&amp;nbsp;and &lt;a href=&quot;https://russellinvestments.com/uk/blog/private-equity-opportunity&quot;&gt;private&lt;/a&gt;&amp;nbsp;assets to achieve client investment goals.&amp;nbsp;&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Three months into 2025, the U.S. IPO (initial public offering) market remains in a rut. Why? And, perhaps just as importantly, is a rebound still possible?&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Drawing on our unique relationship with underlying managers, we&amp;rsquo;ll shed some light on the latter question by tapping into the views of specialist managers. But first, let&amp;rsquo;s take a step back and examine the potential reasons for the slump.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Decrease in IPOs&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Recent &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/volatility-equity-markets-recent-mwir&quot;&gt;volatility&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; aside, equity market returns in the U.S. have been &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/considerations-surging-markets-mwir&quot;&gt;strong&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; in recent years, with the Russell 1000 rising by more than 20% in both 2023 and 2024 - and in five of the past six calendar years. Valuations for U.S. companies are (broadly) within the upper band of their historical valuation ranges, indicating increased investor confidence in the prospective outlook. That constructive backdrop of strong returns and relatively high valuations would normally be a close-to-ideal environment for companies to come public via an initial public offering (IPO), providing an exit for early backers and increased liquidity for employees. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;That, however, is not what has transpired. As can be seen in the below chart, IPOs in 2022, 2023, and 2024 were all well below the long-term annual average of ~$50 billion in capital raised (exclusive of &amp;lsquo;blank check&amp;rsquo; special purpose acquisition companies). While there is a noticeable cyclical pattern to capital raised in IPOs in the chart, there is also an accompanying correlation with underlying market returns. Case-in-point: Prior highwater marks in 1999/2000, 2014, and 2021 all followed extended periods of strong market performance.&lt;br /&gt; &lt;br /&gt; &lt;strong&gt;&lt;em&gt;Capital raised in IPOs&lt;br /&gt; &lt;/em&gt;&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/ipocapital.jpg&quot;&gt;&lt;img alt=&quot;IPO capital&quot; src=&quot;/-/media/images/global/blogs/images/ipocapital.jpg&quot; /&gt;&lt;/a&gt;&lt;br /&gt; Source: Financial Times, Dealogic.&lt;/span&gt;&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;Behind the decline&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;So, what is different this time? Two key factors:&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;First&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, in contrast to prior cycles, the strong market performance since year-end 2022 has predominantly been driven by larger stocks, with the large cap Russell 1000 rising at more than twice the rate of the small cap Russell 2000 in recent years. Even after taking into account recent volatility, large cap stocks continue to trade near all-time highs while small cap stocks are still languishing below their early 2021 levels. With smaller companies usually representing much of the IPO pipeline, market conditions for going public are perhaps less favorable than they might at first appear.&lt;br /&gt; &lt;br /&gt; &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Second&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, companies are staying private longer than before for a multitude of both internally motivated and market environment reasons. These include an SEC-driven increased regulatory and expense burden for public companies, and a desire by founders to retain control. Likewise, the growth of private equity firms into today&amp;rsquo;s giants - and the resultant ready availability of capital - has given companies that would previously have had no choice but to go public a sizable alternative source of funding. &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;What gives? &lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Active equity managers, particularly quality-focused small cap managers who had historically relied on the IPO market to act as a conveyor belt of new opportunities, have had to contend with these challenging dynamics for years. In partnering with these preferred &lt;/span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/february-2025-active-management-insights&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;managers&lt;/span&gt;&lt;/a&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, we are able to share the insights below, detailing their views on the current environment for IPOs and what it might take for more companies to go public. &lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Small cap managers&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; described the current environment as at least partially a &amp;lsquo;hangover&amp;rsquo; from the post-Covid boom in equity issuance in 2021. In particular, they pointed to the more speculative offerings of special purpose acquisition companies (essentially &lt;em&gt;blank check&lt;/em&gt; companies intended as a financing vehicle to acquire other listed companies), many of which underperformed following their listings.&lt;br /&gt; &lt;br /&gt; The more speculative environment and increased investor appetite in 2021 also had the side effect of &amp;lsquo;bringing forward&amp;rsquo; the IPOs of less mature, riskier companies, leaving a reduced pipeline for subsequent years. After three relatively weak years for new offerings, managers are cautiously optimistic that higher quality companies will decide to come public, although recent offerings are not confidence-inducing.&lt;br /&gt; &lt;br /&gt; &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Large cap and small cap managers&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; alike pointed to the steadily increased regulatory burden for companies to go public (including rules added after the 2021 boom) as an added disincentive to list. &lt;br /&gt; &lt;br /&gt; Increased direct listing costs, higher associated legal fees, added obligations for senior executives, and additional reporting expenses were all cited as hindrances to all but the largest candidate companies undertaking an IPO. While there is hope that a changing of the guard at the SEC could crack open the door to lower regulation, companies so far are broadly taking a wait-and-see attitude to any prospective regulatory changes.&lt;br /&gt; &lt;br /&gt; &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Managers&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; also pointed to the increased role played by private equity firms in providing capital for growing companies that previously would have had no choice but to tap the public markets.&lt;br /&gt; &lt;br /&gt; As private equity and private credit have become more mainstream asset classes accessible to a wider segment of underlying investors, the amount of capital managed by the largest PE firms has grown considerably, enabling them to invest ever-larger amounts in later-stage private companies. Yet, while PE&amp;rsquo;s asset base has grown, the underlying mechanics and cyclicality of fundraising and realizations have not, as the chart below shows. Broadly speaking, active equity managers believe the now long-in-the-tooth nature of some earlier PE fund vintages and the need for exits from maturing investments will help to revive the market for IPOs later this year and next.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/fundraising.jpg&quot;&gt;&lt;img alt=&quot;Fundraising&quot; src=&quot;/-/media/images/global/blogs/images/fundraising.jpg&quot; /&gt;&lt;/a&gt;&lt;br /&gt; Source: Goldman Sachs&lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The bottom line &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Capital markets exist to provide a venue and mechanism for price discovery and capital raising. As they always have, the markets will continue to evolve to meet investor needs. &lt;br /&gt; &lt;br /&gt; At Russell Investments, we believe investors benefit from taking a long-term view and a diversified approach to portfolio construction. True to our multi-manager heritage, we build portfolios with those principles in mind, providing access to the value creation opportunities identified by our preferred managers across a wide spectrum of both &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/small-cap-exposure-still-good-idea&quot;&gt;public&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; and &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/private-equity-opportunity&quot;&gt;private&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; strategies to achieve client investment goals.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;Chris Banse<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {604558F4-8711-4370-89BB-950CD4D68B87}https://russellinvestments.com/uk/blog/the-case-for-moc<p style="line-height: normal;"><span> Market-on-Close trading, when used strategically, can enhance transition management by balancing risk reduction, cost efficiency, and client objectives, while navigating the challenges of Implementation Shortfall benchmarking.<br /> <br /> <br /> </span></p>Tue, 11 Mar 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways&lt;/strong&gt;:&lt;/p&gt; &lt;ul class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt; &lt;li&gt;While Implementation Shortfall (IS) is the industry standard benchmark for transparent transition performance, Market on Close (MOC) trading can still be a valid trading strategy despite its potential impact on IS.&lt;/li&gt; &lt;li&gt;MOC trading can align with pricing points, reduce out-of-market risk, and simplify transitions in scenarios like pooled fund subscriptions or redemptions.&lt;/li&gt; &lt;li&gt;For highly liquid securities, MOC trading can reduce risk and simplify strategies with minimal price impact, leveraging increased trading volumes at the market close.&lt;/li&gt; &lt;li&gt;Incorporating MOC trading, when used appropriately, can help fulfil client objectives.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;When benchmark transparency meets the complexities of designing transition management trading strategies, where can MOC trading enhance outcomes for clients?&lt;/p&gt; &lt;p&gt;For over two decades, Implementation shortfall (IS) has been the benchmark for measuring transition performance. Trading strategies like MOC, which inherently influence closing prices, have historically challenged the integrity of the IS benchmark, and have been rarely used when transitioning portfolios &amp;ndash; but does this mean MOC is completely without merit in transition management?&lt;/p&gt; &lt;p&gt;This article will explore developments within financial markets relating to equity trading volumes at the market close and the utility of MOC trading to a transition manager when deciding on an overall transition trading strategy. It will also break down the key considerations surrounding the effects that a trading strategy like MOC has on IS as a benchmark.&lt;/p&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;What is MOC?&lt;/strong&gt;&lt;/p&gt; &lt;div&gt;A market-on-close &amp;ndash; MOC &amp;ndash; order is a type of stock order that instructs a broker to buy or sell a security (or basket of securities) at, or as close to, the closing price of the trading day as possible. MOC orders are used to achieve the last possible price of a trading day. Using a MOC order ensures that the desired transaction is executed, but still leaves the investor exposed to end-of-day price movements, given the auction structure of MOC orders.&lt;/div&gt; &lt;div&gt;&amp;nbsp;&lt;/div&gt; &lt;div&gt;&lt;strong style=&quot;font-size: x-large; letter-spacing: -0.035em;&quot;&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;What is Implementation shortfall?&lt;/span&gt;&lt;/strong&gt;&lt;/div&gt; &lt;p&gt;IS is the generally accepted industry standard for measuring the cost of a transition. First opined by Andre Perold in 1988, refined for specific use in transitions in the T Standard (2003) and adopted by the T Charter (a voluntary code of conduct in the TM industry) in 2007.&lt;/p&gt; &lt;p&gt;IS captures all the costs associated with a transition, including brokerage, taxes, fees, foreign exchange, bid/ask spread, pooled fund spreads, dilution levies, market impact and opportunity cost/gain. IS compares the actual transition portfolio return with that of the target portfolio return, assuming the new portfolio had been built the day before the transition commenced and at zero cost. A key component of IS is using the closing prices on the day prior to when any trading commenced as the benchmark; the point here is to use a &quot;clean&quot; benchmark i.e., one that has not been impacted by the trading you are about to undertake.&lt;/p&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Why has MOC trading not typically been used in TM?&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;Before T Standard IS was adopted by the transition industry and became widely used, there were different approaches to reporting and performance evaluation, which had varying levels of transparency for clients.&lt;/p&gt; &lt;p&gt;The problem with MOC trading was that it directly impacted the benchmark you were measuring performance against. Transition providers could use MOC trading to make reporting appear more favourable by &quot;muddying&quot; the benchmark. Theoretically, a transition management provider who executed all trades for a transition at market-on-close would appear from a reporting perspective to have traded with zero deviation from the benchmark, even though trading in this way can lead to significant price impact and, importantly, delay trading and potentially result in poor performance.&lt;/p&gt; &lt;p&gt;This made it difficult for clients to accurately benchmark transition performance and therefore clients began to demand more transparent reporting standards. In response, the T-Charter was created (Russell was one of the founders) and this led to an industry standard for transition management benchmarking and reporting transparency.&lt;/p&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Is MOC trading all bad?&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;IS is a methodology for measuring performance. MOC is a trading strategy. The two are different and recognising that trading on the close will impact closing prices means MOC should not be a transition benchmark because it uses a reference price that has been affected by the participant&#39;s activity. However, this does not mean that it is not a valid trading strategy, even for use in transitions.&lt;/p&gt; &lt;p&gt;When setting a trading strategy for a transition, our primary objective is to recommend what is in the best interests of the client, by understanding what their objectives and priorities are. We are flexible in our approach and will adjust our strategy if a client has a specific preference or requirement. In some events, MOC trading can be beneficial and additive to an overall trading strategy when used appropriately. In these cases, we will recommend it as part of the overall strategy.&lt;/p&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;When might MOC be appropriate?&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li&gt;&lt;strong&gt;Utilising MOC where events include pooled fund redemptions / subscriptions&lt;/strong&gt;&lt;/li&gt; &lt;ul style=&quot;margin-left: 40px;&quot;&gt; &lt;li&gt;Take the example where one side of a transition is either a subscription/redemption to/from a pooled fund and the other side is a segregated account.&lt;/li&gt; &lt;li&gt;Often the pricing point of such pooled funds is the market close. In this case, to match the pricing point of the subscription or redemption, we would place MOC orders for the other side of the trade, minimising out of market risk.&lt;/li&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;/ul&gt; &lt;li&gt;&lt;strong&gt;Taking advantage of enhanced liquidity to achieve material risk reduction&lt;/strong&gt;&lt;/li&gt; &lt;ul style=&quot;margin-left: 40px;&quot;&gt; &lt;li style=&quot;text-align: left;&quot;&gt;For many years the volume of trading activity at the close has increased significantly.&lt;/li&gt; &lt;li style=&quot;text-align: left;&quot;&gt;For example, the average daily volume traded at the NYSE closing auction has increased by 37% since 2020. As a result, a very liquid trade (measured in terms of % of average daily volume ADV) may only have a negligible impact on the price if traded at the close.&lt;/li&gt; &lt;li style=&quot;text-align: left;&quot;&gt;In this case, we can adopt MOC where trading a liquid portion of the portfolio (for example &amp;lt;2% ADV) will materially reduce overall risk in the transition and would have minimal effect on the price due to its liquidity.&lt;/li&gt; &lt;li style=&quot;text-align: left;&quot;&gt;By trading MOC in this scenario you can reduce the complexity of the overall strategy by reducing the need to use futures for hedging country risk, and can reduce stock specific risk by targeting those names with the highest contribution to risk in the transition, which is a positive outcome for the client.&lt;/li&gt; &lt;li style=&quot;text-align: left;&quot;&gt;As managing risk is one of the key components in managing transitions, an MOC trade can be an important risk management tool in the transition manager&#39;s arsenal. An immediate risk reduction might also help reduce the potential opportunity cost of being in the legacy portfolio for a shorter period of time.&lt;/li&gt; &lt;/ul&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;The T-Charter and IS were adopted by the transition industry to improve transparency for clients. The natural consequence of this was a move away from trading strategies such as MOC, which might impact that transparency.&lt;/p&gt; &lt;p&gt;However, there could be times when a client wants to forgo a level of transparency if this helps reduce cost or risk during a transition. In such cases, it would be remiss of the transition manager not to explore and present all options available. While it is vital to highlight the pros and cons of incorporating an MOC trade, it is important that the client ultimately has all the options at their disposal to make the most informed decision possible.&lt;/p&gt; &lt;p&gt;[promobox]&lt;/p&gt; &lt;hr /&gt; &lt;span style=&quot;font-size: 16px;&quot;&gt; &lt;/span&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt; &lt;p&gt;The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.&lt;/p&gt; &lt;p&gt;Execution services are provided by Russell Investments Implementation Services Inc., member FINRA/SIPC.&lt;/p&gt; &lt;/ul&gt;Chris AdolphTravis Bagley<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {181040AB-BDE3-4394-8EFB-AE7325829B8D}https://russellinvestments.com/uk/blog/us-dollar-losing-luster<span style="letter-spacing: -0.56px;">As global alliances shift, the unquestioned dominance of the U.S. dollar is fading. How can investors adapt?</span>Tue, 11 Mar 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;The U.S. dollar&amp;rsquo;s dominance is slipping amid a highly concentrated stock market and shifting global alliances.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;While no single currency is poised to replace the dollar, we believe investors should consider diversifying their currency exposure.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;We think the Japanese yen offers potential safe-haven benefits.&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;For decades, the U.S. dollar&amp;rsquo;s dominance has rested on two pillars: America&amp;rsquo;s deep capital markets and its global security alliances. Today, both are under strain. Shifting U.S. foreign policy, rising geopolitical uncertainty, and an overextended stock market are making investors and policymakers reconsider their exposure to the greenback.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;Fundamental forces have driven a stronger U.S. dollar (USD) in the last five years. After the Covid pandemic, the U.S. &amp;nbsp;Federal Reserve (Fed) started raising interest rates earlier and more aggressively than most other major central banks, leading to an interest rate advantage for the USD. Energy prices spiked when Russia invaded Ukraine in 2022, putting energy importers in Europe and Asia at a disadvantage to the U.S. due to America&amp;rsquo;s energy independence. Lastly, the global dominance of the U.S. technology sector and outperformance of its stock market over other regions gave rise to the notion of &amp;ldquo;U.S. exceptionalism&amp;rdquo;. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;These forces have propelled the U.S. dollar&amp;rsquo;s valuation to a historically high level. Among the 10 most traded developed-market currencies, the USD is the second-richest relative to its purchasing power parity level&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;1&lt;/span&gt;&lt;/sup&gt;, only behind the Swiss franc. Another valuation metric, the real trade-weighted dollar index published by the Bank for International Settlements, suggests that the dollar is expensive compared to its long-run average (see chart). It was significantly higher only once in the last 55 years&amp;mdash;in 1985, when the &amp;ldquo;Plaza agreement&amp;rdquo; between the U.S. and four major trading partners to deliberately push the value of the dollar down led to a multi-year dollar bear market.&lt;/span&gt;&lt;/p&gt; &lt;div&gt;&lt;strong&gt;&lt;em&gt;USD valuation is stretched&lt;br /&gt; &lt;br /&gt; &lt;/em&gt;&lt;/strong&gt;&lt;/div&gt; &lt;p&gt;&lt;strong&gt;&lt;em&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/luu37currencies.jpg&quot;&gt;&lt;img alt=&quot;US trade weighted dollar&quot; src=&quot;/-/media/images/global/blogs/images/luu37currencies.jpg&quot; /&gt;&lt;/a&gt;&amp;nbsp;&lt;/em&gt;&lt;/strong&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;Shifting alliances&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;The United States has long been the guarantor of global stability, a role that reinforced the dollar&amp;rsquo;s status as the world&amp;rsquo;s reserve currency. Berkeley economist Barry Eichengreen and his co-authors&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;2&lt;/span&gt;&lt;/sup&gt;&amp;nbsp;argue that security alliances play as important a role as economic fundamentals in the choice of reserve currencies. Countries that are reliant on the United States for military support hold more USD than is justified on purely economic grounds. Yet as Washington&amp;rsquo;s commitments appear more conditional&amp;mdash;see the recent frictions between the U.S. and Ukraine over military support&amp;mdash;its allies are reassessing their strategic and financial dependencies.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;Last week, &lt;/span&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/german-elections-2025&quot;&gt;Germany&amp;rsquo;s incoming government&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt; decided to exempt defense spending from its deficit limits, paving the way for much increased military spending. Europe&amp;rsquo;s renewed focus on defense autonomy and China&amp;rsquo;s continued push for alternative payment systems underline a broader trend that has so far been developing gradually: diversification away from the dollar. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;Where to hide?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;Beyond geopolitics, another risk looms: the high concentration of U.S. stock markets. The S&amp;amp;P 500&amp;rsquo;s dependence on a handful of technology giants has created an increasingly &lt;/span&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/mag-7-concentrations-complications&quot;&gt;top-heavy market&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;, with the &lt;em&gt;Magnificent Seven&lt;/em&gt;&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;3&lt;/span&gt;&lt;/sup&gt;&amp;nbsp;companies at times accounting for more than one-third of the market capitalization of the index. Concerns around &lt;/span&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/market-concentration-active-management&quot;&gt;high market concentration in U.S. equity markets&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt; could induce capital outflows. With roughly 60% of global reserves still held in dollars, even a modest reallocation would have significant consequences for exchange rates. However, no single currency or asset is poised to replace the dollar, but a more fragmented order is emerging.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;[promobox]&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;Gold &lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;is one alternative reserve asset. Central bank purchases of gold have increased in recent years, signalling demand for hedges against monetary uncertainty. The World Gold Council estimates that central banks added around 1,000 tons of gold reserves in 2024. This is well reflected in high gold prices of $2,920 per ounce as of March 7, a rise of nearly 80% since November 2022.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;We believe that the &lt;strong&gt;Japanese yen&lt;/strong&gt; is a more attractive safe-haven asset than gold today, given its defensive characteristics. If global markets hit a rough patch, the yen&amp;rsquo;s undervaluation makes it one of the most attractive risk-off bets for investors seeking refuge. Over the period in which gold rose by 80%, the yen has fallen by around 5% against the U.S. dollar. In 2025, it has started to reverse that trend and is nearly 7% stronger year-to-date. We believe the yen can rise further, especially if market turbulence continues. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;The new order&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;In hindsight, international diversification was not beneficial to U.S. investors in the last five years as U.S. stocks outperformed and the USD strengthened. The dollar&amp;rsquo;s supremacy has withstood repeated challenges, and it would be premature to predict its demise. Yet its era of unquestioned dominance is fading. We believe investors should adjust accordingly, accounting for currency diversification, geopolitical shifts, and a world in which international capital increasingly seeks alternatives. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;Amid these shifts, investors should reconsider how they manage foreign exchange (FX) exposure. &lt;/span&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;Currency strategies using a rules-based approach&lt;/span&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;, focusing on Carry, Value, and Trend factors, offer return potential and diversification benefits. Thoughtful FX management is no longer optional. It&amp;rsquo;s essential in a multipolar financial system.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;Adaptation, not complacency, will define the next era of global capital markets.&lt;/span&gt;&lt;/p&gt; &lt;hr align=&quot;left&quot; size=&quot;1&quot; width=&quot;33%&quot; /&gt; &lt;div id=&quot;ftn1&quot;&gt; &lt;/div&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;1&lt;/sup&gt;&amp;nbsp;Purchasing power parity measures at which exchange rate the cost of living would be equalized in two different countries. It is a commonly used metric for the &amp;ldquo;fair value&amp;rdquo; of a currency.&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;2&lt;/sup&gt; See&amp;nbsp;&lt;a href=&quot;https://cepr.org/voxeu/columns/mars-or-mercury-geopolitics-international-currency-choice&quot;&gt;https://cepr.org/voxeu/columns/mars-or-mercury-geopolitics-international-currency-choice&lt;/a&gt;&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;3 &lt;/sup&gt;The &amp;ldquo;Magnificent Seven&amp;rdquo; are&amp;nbsp;Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;Alexander Cousley<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {1A37F515-92FF-4152-94B9-4F72FEEA5749}https://russellinvestments.com/uk/blog/tariff-uncertainty-markets-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Volatility continues amid trade war worries </span></li> <li><span>ECB lowers rates again</span></li> <li><span>China announces 2025 growth target</span></li> </ul>Fri, 07 Mar 2025 01:43:18 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;Markets remain volatile amid trade war worries&amp;nbsp;&lt;/li&gt; &lt;li&gt;The European Central Bank lowered rates again&lt;/li&gt; &lt;li&gt;China announced a 2025 growth target of 5%&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Senior Investment Strategist and Head of Canadian Strategy, BeiChen Lin, discussed how markets are reacting to U.S. trade policy uncertainty. He also reviewed the European Central Bank&amp;rsquo;s (ECB) latest decision on rates and shared key takeaways from China&amp;rsquo;s annual political meetings.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Markets jolted &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin began by noting it&amp;rsquo;s been a particularly bumpy week in U.S. and global equity markets, primarily due to uncertainty around tariffs. Stressing that the situation remains fluid and dynamic, he said the week began with confirmation from U.S. President Donald Trump that the U.S. would &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/us-tariffs-stocks&quot;&gt;impose previously paused 25% tariffs&lt;/a&gt;&lt;/span&gt;&lt;span&gt; on Mexican and Canadian imports and increase tariffs on Chinese imports.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;span&gt;Following this development, Canada announced it would implement retaliatory tariffs on a subset of U.S. exports, while Mexico said it would unveil retaliatory measures over the weekend, Lin said. As a result, &lt;/span&gt;&lt;span&gt;equity markets sold off sharply Monday and Tuesday, he said. &lt;/span&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;p&gt;&lt;span&gt;The rollercoaster ride continued Wednesday, with a noticeable rebound in markets after senior U.S. administration officials hinted the U.S. might delay tariffs on some products from Mexico and Canada, Lin stated. This was followed by confirmation from the White House on Thursday that Mexican and Canadian imports covered under the U.S.-Mexico-Canada Agreement (USMCA) would be exempt from tariffs for 30 days, Lin explained. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Despite this news, he noted U.S. equity markets still sold off sharply on Thursday, with the benchmark S&amp;amp;P 500 Index down by 2% at one point during the day. Why? Lin explained that even with the reprieve, plenty of questions about tariffs remain. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;For instance, what percentage of Mexican and Canadian goods will count as qualifying goods under the USMCA trade pact? And what will happen after the 30-day reprieve? Will these tariffs be re-implemented? If so, how might Mexico and Canada respond? And could the U.S. potentially impose tariffs on other countries or products? Or will a deal be reached to scrap tariffs altogether? These are all important questions that remain unanswered,&amp;rdquo; Lin noted. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Ultimately, markets dislike uncertainty - and that&amp;rsquo;s a big reason why there&amp;rsquo;s been so much volatility lately, he said. Lin finished by emphasising that during times like today, it&amp;rsquo;s important for investors to stay disciplined and close to their strategic asset allocations.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;I think it&amp;rsquo;s critical for investors to take a long-term perspective when thinking about portfolio decisions, rather than reacting to all the &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/volatility-equity-markets-recent-mwir&quot;&gt;noise and volatility in the markets&lt;/a&gt;&lt;/span&gt;&lt;span&gt;,&amp;rdquo; he stated. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;ECB cuts continue&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Shifting to Europe, Lin said the ECB decided to lower interest rates by 0.25% at its March policy meeting. The decision was in line with what most economists were expecting, he added.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Lin noted the ECB characterised rates as &amp;ldquo;meaningfully less restrictive&amp;rdquo; than before, which was a change from prior statements. At the same time, however, the central bank also downgraded its growth forecast for 2025 and 2026, he said. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;The bottom line here is that moving forward, the ECB - &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/themes-q4-2024-earnings-mwir&quot;&gt;like major central banks elsewhere&lt;/a&gt;&lt;/span&gt;&lt;span&gt; - will likely remain data-dependent. From my vantage point, this means if the European economy were to slow due to new tariffs or other factors, the ECB could potentially cut rates by more than markets expect,&amp;rdquo; Lin stated. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;China&#39;s growth goal&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Pivoting to China, Lin noted that the world&amp;rsquo;s second-largest economy kicked off its annual political meetings - known as the Two Sessions - earlier this week. At the gathering, the Chinese government announced a 5% GDP (gross domestic product) growth target for 2025, he said. &amp;ldquo;This matches the growth target China set last year, but it&amp;rsquo;s important to understand that with each passing year, a 5% increase from the prior year becomes a higher hurdle to meet,&amp;rdquo; Lin explained. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He said that from his perspective, China will likely need to &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/china-outlook-2025&quot;&gt;inject more stimulus&lt;/a&gt;&lt;/span&gt;&lt;span&gt; into the economy in order to reach this target. While government leaders did express a desire to roll out more stimulus measures, such as potential tax cuts, no major stimulus packages have been announced, Lin said. Instead, Chinese leaders have unveiled incremental stimulus measures that are roughly in line with economist expectations, he explained. However, there could still be more stimulus to come, Lin added.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;Because China is very committed to boosting economic growth, I think there&amp;rsquo;s a possibility we&amp;rsquo;ll see more stimulus measures in the months ahead,&amp;rdquo; he concluded. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/sGloiG_prD8&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/16752714&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;BeiChen Lin<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {E69C7600-6BAD-4373-B148-4B86AD3CF154}https://russellinvestments.com/uk/blog/us-tariffs-stocks<span style="letter-spacing: -0.56px;">With the U.S. set to impose 25% tariffs on imports from Canada and Mexico, our chief investment strategist for North America assesses the potential market and economic impacts.</span>Tue, 04 Mar 2025 00:00:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Equity markets sold off sharply Monday after President Donald Trump confirmed that the U.S. would impose 25% tariffs on Canadian and Mexican imports beginning March 4.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;We estimate that these tariffs could boost consumer prices by 75 basis points. However, we don&amp;rsquo;t expect that they will be enough to tip the U.S. economy into a recession.&amp;nbsp;&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;We still think the Fed could cut interest rates two or three times this year.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Our measure of market sentiment is now at its most pessimistic level since 2023. Still, we believe long-term investors will benefit from staying disciplined and sticking to their strategic plan.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Equity markets sold off on Monday with the ongoing momentum unwind in U.S. tech exacerbated by President Trump&amp;rsquo;s comment that new tariffs against Canada, Mexico, and China will all move forward on March 4. The&lt;em&gt; &lt;/em&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;risk-off&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;em&gt; &lt;/em&gt;tone was felt across asset classes.&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The S&amp;amp;P 500 traded down 1.8% and is off around 4.5% from its mid-February high&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The 10-year U.S. Treasury yield fell 7 basis points, a decline of over 60 bps &lt;a href=&quot;/uk/blog/yield-spike&quot;&gt;from mid-January&lt;/a&gt;&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The Japanese yen strengthened while the Canadian dollar and Mexican peso sold off&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The steps against Canada and Mexico, in particular, were surprising as many investors thought a last second deal or delay was possible. Suffice to say: trade policy uncertainty remains extremely high.&amp;nbsp;We don&amp;rsquo;t know if these new tariffs are sustainable and how long they will last.&amp;nbsp;&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Stunted Growth?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Tariffs are simply a tax on imported products&amp;mdash;a tax which should directionally slow economic growth and provide a one-time boost to the price of those goods. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Canada, Mexico and China are the United States&amp;rsquo; three largest trading partners. Our calculations suggest that sustaining tariffs at these levels would hit U.S. real GDP growth by around 75 basis points and &lt;a href=&quot;/uk/blog/estimating-tariff-impacts&quot;&gt;boost core PCE (personal consumption expenditures) inflation&lt;/a&gt;&amp;nbsp;by a similar degree. But these import exposures are unlikely to be felt uniformly across the economy. We estimate that the consumer discretionary (think automobiles), industrials and materials (lumber, for example) sectors are most exposed to the new trade actions while other sectors like financials are likely to be more insulated.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In short, we don&amp;rsquo;t think the tariffs are enough to knock the U.S. economy over into a recession but they could meaningfully dent the macro outlook.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;font-weight: 700;&quot;&gt;Doing the Math&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Tariffs complicate the calculus for central bankers given cross-cutting impacts onto growth (dovish) and inflation (hawkish, particularly if inflation expectations rise). Although some measures of inflation expectations have risen, market expectations for medium-term inflation still look well-anchored for now.&amp;nbsp;We expected gradual Fed rate cuts in 2025 as underlying inflation moved closer to target. We still see gradual cuts even with a mix shift of drivers from trade policy&amp;mdash;weaker growth and stickier inflation. Indeed, the Fed cut rates in 2019 in response to the trade war with China and weaker global growth. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;What&#39;s Next?&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Our strategies have broadly been focused on diversification, risk management, and security selection into high policy uncertainty. For bonds, our assessment of Treasury valuation has downshifted from attractive in mid-January to fairly priced today. For example, our estimate of fair value on the 10-year Treasury is 4.1% and we expect two or three Fed rate cuts in 2025&amp;mdash;both of which are on top of current market pricing. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;For stocks, the mega-cap selloff and trade tensions have pushed our proprietary measure of market psychology to its most pessimistic level since 2023. To be clear, we are not yet at an unsustainable extreme of investor panic that would warrant a more risk-on posture in our portfolios. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;But, even at these levels, long-term investors are usually rewarded for being in the market and sticking to their strategic plan. Our active managers continue to find opportunities in sectors like financials which offer better relative value and could benefit from some of the Trump administration&#39;s policy changes.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;Paul Eitelman<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {EDE9D0F4-2C9C-4533-99E4-16F6DA2A5971}https://russellinvestments.com/uk/blog/volatility-equity-markets-recent-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>U.S. mega-cap tech names sell off</span></li> <li><span>U.S. tariffs on Mexican and Canadian imports could begin next week</span></li> <li><span>Consumer confidence ticks down in latest surveys </span></li> </ul>Fri, 28 Feb 2025 05:10:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;U.S. mega-cap tech names have sold off in recent weeks&lt;/li&gt; &lt;li&gt;The U.S. could implement 25% tariffs on Mexican and Canadian imports next week&lt;/li&gt; &lt;li&gt;Recent surveys show a decline in U.S. consumer confidence&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Senior Director and Chief Investment Strategist for North America, Paul Eitelman, explored key reasons behind the recent decline in U.S. equity markets. He attributed the downturn to three main factors: the selloff in mega-cap tech stocks, U.S. trade-policy uncertainty, and U.S. economic growth concerns.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Are equity markets broadening out? &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Eitelman began by noting that U.S. equities, as measured by the benchmark S&amp;amp;P 500 Index, were off by roughly 2.5% this week, as of market close on Feb. 27. The risk-off tone has helped spark a broader rally in the bond market, he said, noting that U.S. 10-year Treasury yields have fallen by roughly 50 basis points (bps) since &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/uk/blog/yield-spike&quot;&gt;peaking near 4.8% in mid-January&lt;/a&gt;&lt;/span&gt;&lt;span&gt;. &amp;ldquo;That&amp;rsquo;s a pretty substantial move in a short period of time,&amp;rdquo; Eitelman observed. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He said that the main market-moving event of the week was the reaction to AI (artificial intelligence)-chipmaker Nvidia&amp;rsquo;s fourth-quarter earnings results, which were released after market close on Feb. 26. The company&amp;rsquo;s earnings still topped consensus expectations, but not by nearly as much as in prior quarters, Eitelman said. This led Nvidia shares to tumble by over 8% the following day, he noted. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Zooming out for a wider look at the U.S. equity market, Eitelman said that market leadership has started to broaden out in 2025. Case-in-point: The Magnificent Seven group of stocks are actually underperforming the other 493 names in the S&amp;amp;P 500 by 12 percentage points so far this year, he said. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;This is a notable rotation in U.S. stocks&amp;ndash;and one that &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/uk/global-market-outlook&quot;&gt;we expected going into the year&lt;/a&gt;&lt;/span&gt;&lt;span&gt;,&amp;rdquo; Eitelman remarked. He added that there&amp;rsquo;s also been a broadening out in market leadership globally, with both Europe and China outperforming the U.S. so far in 2025.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Trade-policy uncertainty weighs on markets &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Shifting to U.S. trade policy, Eitelman said that &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/uk/blog/estimating-tariff-impacts&quot;&gt;uncertainty over potential U.S. tariffs&lt;/a&gt;&lt;/span&gt;&lt;span&gt; also rattled markets this week. &amp;ldquo;U.S. President Donald Trump sounded very serious in his intent to move forward with implementing a 25% tariff on imports from Canada and Mexico,&amp;rdquo; he remarked, noting that this plan was &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/uk/blog/us-tariffs-potential-implications&quot;&gt;paused for 30 days in early February&lt;/a&gt;&lt;/span&gt;&lt;span&gt;. The tariffs are set to go into effect on March 4, Eitelman said, adding that the president also indicated he&amp;rsquo;ll place an additional 10% tariff on Chinese imports at the same time. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;The seriousness around a potential &lt;a href=&quot;/404 error page?item=web%3a%7bD4F89AD8-AEB2-418C-9320-ED7B6807D1F4%7d%40en-GB&quot;&gt;follow-through on tariffs&lt;/a&gt;&amp;nbsp;by the U.S. government likely contributed to some incremental risk aversion in markets this week,&amp;rdquo; he remarked. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;U.S. unemployment claims rise&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Eitelman closed with a look at recently released U.S. economic data, which he said was disappointing at the margin. Initial weekly unemployment claims rose to 242,000 for the week ending Feb. 22, he said&amp;ndash;the highest amount since last October. Some of the new filings came from Washington, D.C., Eitelman said, noting they may be related to the Department of Government Efficiency&amp;rsquo;s (DOGE) efforts to reduce the size of the federal government. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;On top of this, the latest survey from The Conference Board showed a step-down in confidence among U.S. consumers, he noted. Those findings aligned with the results from a similar University of Michigan survey, which also showed a drop in consumer sentiment, Eitelman stated. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;However, Eitelman said &lt;a href=&quot;/uk/blog/europe-canada-us-rates-mwir&quot;&gt;many fundamental measures&lt;/a&gt;&amp;nbsp;of the U.S. economy still appear fairly solid. &amp;ldquo;The economy continues to look resilient and on a path to a soft landing. That said, what happens around U.S. trade policy could have an outsised impact on the ultimate outcome,&amp;rdquo; he remarked. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Eitelman finished by noting that he&amp;rsquo;s starting to see some pessimism creep into the market. &amp;ldquo;For long-term investors, it&amp;rsquo;s important to stay disciplined and in the game during times of uncertainty like these,&amp;rdquo; he concluded. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/bjNPHtq1DdQ&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/16670204&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;Paul Eitelman<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {8493AB1A-492F-4548-A098-78825D8931EC}https://russellinvestments.com/uk/blog/german-elections-2025<span style="letter-spacing: -0.56px;">Germany’s right-of-centre Christian Democrats emerged victorious in the country’s federal elections. How are financials markets reacting to the news?</span>Mon, 24 Feb 2025 00:00:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;The conservative Christian Democrats (CDU/CSU), led by Friedrich Merz, won Germany&#39;s 23rd February elections but garnered only 28.5% of the vote. Because of this, Merz&amp;mdash;who will become the next chancellor of Germany&amp;mdash;will need to form a coalition government with at least one other party.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;The outgoing Social Democrats (SPD), headed by current Chancellor Olaf Scholz, captured just 16.4% of the vote&lt;span style=&quot;letter-spacing: -0.63px;&quot;&gt;&amp;mdash;their&lt;/span&gt;&amp;nbsp;worst performance since World War II. The party was topped in the polls by the far-right Alternative for Germany (AfD), which came in second with an unprecedented 20.8% of the vote.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Although the Social Democrats suffered heavy losses, they are still likely to be the junior partner in the next coalition government led by Merz and the CDU/CSU, as Merz has ruled out working with the AfD.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Financial markets rose on the likelihood of a two-party coalition between the CDU/CSU and the SPD, with Germany&#39;s benchmark DAX Index up 0.7%.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Europe&amp;rsquo;s largest economy has voted for a new government. The right-of-center Christian Democrats (CDU/CSU) will lead it, and their leader Friedrich Merz is set to be the next chancellor of Germany. However, with the CDU/CSU securing only 28.52%&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;1&lt;/span&gt;&lt;/sup&gt; of the vote, they will need at least one coalition partner to form a government.&lt;/span&gt;&lt;/p&gt; &lt;div&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;&lt;strong&gt;&lt;em&gt;German election vote share&lt;/em&gt;&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/luu224_1.jpg&quot;&gt;&lt;img alt=&quot;German election results&quot; src=&quot;/-/media/images/global/blogs/images/luu224_1.jpg&quot; /&gt;&lt;/a&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;font-size: 13px; color: black;&quot;&gt;&lt;em&gt;Source: Federal Elections Returning Officer, as of 24 February 2025, 6:44 CET&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;All traditional parties have ruled out working with the far-right Alternative for Germany (AfD) who won an unprecedented 20.8% of the vote and emerged as the second-largest party. The AfD gained 10.4 percentage points compared to the 2021 election. The surge in far-right support in the German electorate, along with gains for the far-left party Die Linke on 8.77%, leaves the Bundestag as fragmented as ever. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;The parties of the outgoing government were punished for their track record. Chancellor Olaf Scholz&#39;s Social Democrats (SPD) suffered a dramatic decline, recording their worst post-war performance at 16.41%. The Greens limited their losses and garnered 11.61%. In a sign that the electorate held them responsible for the government&amp;rsquo;s collapse, the Liberal Democrats (FDP) failed to clear the 5% hurdle and will not sit in the next Bundestag. Nor will the far-left BSW (4.97%), a breakaway party from Die Linke.&lt;/span&gt;&lt;/p&gt; &lt;h2 style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;&lt;strong&gt;Germany&amp;rsquo;s economy falling behind despite low unemployment&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;The reasons for the increasing fragmentation of the political landscape are manifold. They reflect a deeper economic paradox: near-record low unemployment yet record-high concern about the economy. Polling from Forschungsgruppe Wahlen (see Chart) shows a growing belief that the country is on the wrong track. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;&lt;strong&gt;&lt;em&gt;Concerns for German voters&lt;/em&gt;&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;/div&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;font-size: 13px; color: black;&quot;&gt;&lt;em&gt;&lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/luu224_2.jpg&quot;&gt;&lt;img alt=&quot;German economic concerns&quot; src=&quot;/-/media/images/global/blogs/images/luu224_2.jpg&quot; /&gt;&lt;/a&gt;&lt;br /&gt; Source: Forschungsgruppe Wahlen, 14 February 2025&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Despite full employment, Germany has been in mild recession for two consecutive years, with GDP shrinking 0.2% in 2024 and 0.3% in 2023. Stagnant growth, high energy costs, and rising global competition have fueled economic pessimism among the populace. Once a world leader in engineering, Germany is now seen as falling behind in key technologies like semiconductors, artificial intelligence, software, and - most painfully - automotive engineering. Its car industry, long an economic pillar, is struggling against fierce competition from China in the electric vehicle market.&lt;/span&gt;&lt;/p&gt; &lt;h2 style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;&lt;strong&gt;Immigration concerns underpin AfD&amp;rsquo;s surge&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;After the invasion of Ukraine by Russia in 2022, energy prices surged in Europe, straining German consumers and industries. Energy security and climate policy were major concerns for the electorate in recent years but have now been overtaken by immigration and the integration of foreigners, explaining the AfD&amp;rsquo;s surge. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Difficult trade-offs await Mr Merz. With an ageing population, Germany needs skilled foreign workers but the attitude towards immigrants has been negatively affected by violent extremist attacks carried out by asylum seekers. The new government needs to balance the worries of a significant share of the population about immigration and integration with the need for Germany to remain open to the skilled foreign workers the country needs, and to those fleeing war and persecution.&lt;/span&gt;&lt;/p&gt; &lt;h2 style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;&lt;strong&gt;Markets focus on coalition negotiations&amp;hellip;&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Financial markets breathed a sigh of relief when it became clear that the CDU/CSU could form a government with the SPD. The euro rose by 0.5% vis-&amp;agrave;-vis the US dollar to 1.05 and DAX futures also recorded gains of 0.9% as of 7:30 GMT this morning. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Merz (and the markets) prefer a two-party coalition to a three-party coalition that would include the Greens. The former will be easier to negotiate and more likely to last the full term. Since the FDP and far-left BSW did not clear the 5% hurdle, an alliance between the CDU/CSU and SPD will have a slim majority in the Bundestag. Once called the &amp;ldquo;grand coalition&amp;rdquo;, support for both parties has shrunk over the years. They now need to work together again, having governed Germany four times since the founding of the Federal Republic. The presumptive chancellor has given himself until Easter to conclude coalition talks, a tight timeline by German standards.&lt;/span&gt;&lt;/p&gt; &lt;h2 style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;&lt;strong&gt;&amp;hellip;and the debt brake&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Markets will closely watch the new government&amp;rsquo;s stance on the &amp;ldquo;debt brake policy&amp;rdquo;, which restricts federal budget deficits and has limited the government&#39;s ability to loosen fiscal policy. While consensus exists to uphold this policy, fierce debate surrounds its flexible interpretation, particularly regarding defense spending amid rising geopolitical tensions. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Germany also needs more investment in transport infrastructure, energy security, and education. Markets are watching whether a new government can reform the debt brake to allow for such investments. However, the parties of the center do not hold the two-thirds seat majority needed for constitutional reform so they would need either the AfD or Die Linke to go along.&lt;/span&gt;&lt;/p&gt; &lt;h2 style=&quot;background: white; margin: 3.95pt 0in 11.25pt;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Germany has voted. A high turnout of 82.5% showed how much was at stake at this election. The conservative CDU/CSU is set to lead the new government by becoming the strongest party in the Bundestag, albeit with a vote share of only 28.52%. The center of German politics just about held, with the Social Democratic SPD suffering heavy losses, but still likely to be the junior partner in the next coalition government led by Friedrich Merz of the CDU/CSU. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Financial markets were relieved that the AfD&amp;rsquo;s vote share was limited to 20.8% and that a two-party coalition between the CDU/CSU and SPD remains feasible. Germany&amp;rsquo;s traditional governing parties, from which every chancellor since 1949 has come, must now demonstrate they can address the country&amp;rsquo;s pressing challenges. If they fail, shutting out the AfD from power may prove impossible next time.&lt;/span&gt;&lt;/p&gt; &lt;hr align=&quot;left&quot; size=&quot;1&quot; width=&quot;33%&quot; /&gt; &lt;div id=&quot;ftn1&quot;&gt; &lt;/div&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;1&lt;/sup&gt; According to preliminary results by the Federal Elections Returning Officer (Bundeswahlleiterin).&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;Van Luu<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {5E750BA5-91C2-45AC-9664-FF8FD0A0E0A2}https://russellinvestments.com/uk/blog/rba-lowers-rates-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Australia’s central bank cuts rates by 25 bps</span></li> <li><span>Canadian inflation ticks up in January </span></li> <li><span>Chinese equities rally on anticipation of more stimulus</span></li> </ul>Fri, 21 Feb 2025 05:10:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;Australia&amp;rsquo;s central bank cut rates by 25 basis points&lt;/li&gt; &lt;li&gt;Canadian inflation ticked up during January&amp;nbsp;&lt;/li&gt; &lt;li&gt;Chinese equities have rallied on investors&amp;rsquo; expectations for more stimulus this year&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Senior Investment Strategist and Head of Canadian Strategy, BeiChen Lin, discussed the recent interest rate announcement from the Reserve Bank of Australia (RBA). He also assessed how the latest Canadian inflation data could impact upcoming monetary policy decisions from the Bank of Canada (BoC), and concluded by examining the recent performance of Chinese equities.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;RBA cuts rates as price pressures moderate &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin began with a look at the RBA&amp;rsquo;s Feb. 18 decision to lower its benchmark lending rate by 25 basis points (bps) to 4.1%. The rate cut was the Australian central bank&amp;rsquo;s first of the cycle, he said, lagging most other major central banks, which began lowering rates last year. However, despite the later start, Lin said he expects the RBA to still be able to gradually take rates to a more neutral setting as inflation continues to ease. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Following the central bank&amp;rsquo;s announcement, the Australian Bureau of Statistics released two additional data points that were supportive of the RBA&amp;rsquo;s decision, Lin noted. The first was a report showing that wage pressures during the fourth quarter of 2024 rose at a softer-than-expected pace, he said. &amp;ldquo;This was a positive development that suggests that over time, Australian inflation should be able to continue moderating,&amp;rdquo; Lin remarked. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;The second data point was the country&amp;rsquo;s unemployment rate, which rose slightly to 4.1% in January, he said. Characterising the number as generally in line with consensus expectations, Lin said it suggests that the Australian labour market is softening a bit&amp;mdash;but importantly, not at an alarming rate. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Canadian inflation numbers surprise to the upside &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Turning to Canada, Lin said that both consumer and producer prices came in somewhat hotter than expected during January. However, he stressed the importance of looking at the country&amp;rsquo;s overall inflation rate, which currently sits at 2.5% if the BoC&amp;rsquo;s preferred measure of core inflation is used. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;This number is already within the central bank&amp;rsquo;s 1%-3% target range&amp;mdash;and it&amp;rsquo;s down significantly from its 2022 peak. In addition, if the BoC&amp;rsquo;s old measure of core inflation is applied, the annual inflation rate is even lower, at 2.1%,&amp;rdquo; Lin explained. Amid this backdrop, he said the central bank is likely to be a little more tolerant of a temporary setback in inflation than it would be if the inflation rate were higher. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Lin said that as long as inflation continues to moderate, the BoC should be able to eventually lower interest rates to a neutral setting of 2.75%. Noting that the &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/uk/blog/us-tariffs-potential-implications&quot;&gt;risks of an economic slowdown in Canada&lt;/a&gt;&lt;/span&gt;&lt;span&gt; are a little more elevated than in the U.S., he said the BoC could wind up cutting rates even more meaningfully if the country were to tip into a recession. Even if Canada avoids a recession, Lin said it&amp;rsquo;s still possible the central bank could drop rates below 2.7% later this year due to the country&amp;rsquo;s weak jobs market and sluggish economic growth. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Noting that markets are pricing in less than a 50% chance of a rate cut at the BoC&amp;rsquo;s next policy meeting in March, Lin said he thinks the outcome could go either way. &amp;ldquo;I believe it&amp;rsquo;s &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/uk/blog/considerations-surging-markets-mwir&quot;&gt;quite possible that the BoC will still cut rates next month&lt;/a&gt;&lt;/span&gt;&lt;span&gt;&amp;mdash;but the decision will probably hinge on what the next labour-market report reveals,&amp;rdquo; he stated.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;What&amp;rsquo;s helping fuel the rally in Chinese stocks?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin wrapped up by unpacking the recent strength in Chinese equities, which he said can be partially attributed to investor expectations for more stimulus this year. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;China will be holding its National People&amp;rsquo;s Congress meeting in March&amp;mdash;and during this meeting, the government is likely to announce its GDP (gross domestic product) growth target for 2025. We think that if a target of around 4.5%-5.0% is announced, &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/uk/blog/china-outlook-2025&quot;&gt;more meaningful stimulus will probably be needed&lt;/a&gt;&lt;/span&gt;&lt;span&gt;,&amp;rdquo; he explained. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Liin said that because of the recent rally, Chinese equities now appear somewhat overbought, relative to the broader equity market. That said, he noted that Chinese equity valuations still look reasonable and are more attractive than their U.S. counterparts. &amp;ldquo;With this in mind, we continue to think that having diversified portfolio exposure&amp;mdash;including an allocation to China&amp;mdash;could be important for investors,&amp;rdquo; he concluded. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/bjNPHtq1DdQ&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/16670204&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;BeiChen Lin<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {D716717D-DC7B-43CD-B892-85B0944B1FC5}https://russellinvestments.com/uk/blog/investment-succession-plan<span style="letter-spacing: -0.56px;">What would happen if your top investment brass wasn’t there tomorrow – for whatever reason? As uncomfortable as the topic can be, we believe it’s vital for all organisations to address the issue of investment succession planning as soon as possible.</span>Tue, 18 Feb 2025 00:00:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;span&gt;Change is inevitable at all organisations &amp;ndash; which is why it&amp;rsquo;s critical to have an investment succession plan in place when managing financial assets.&amp;nbsp;&amp;nbsp;&lt;/span&gt;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;A small investment staff can create a big succession risk, but you don&amp;rsquo;t have to go it alone.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Consider reaching out to a skilled OCIO provider so that when the inevitable does strike, the transition is seamless. A deeper bench of resources can cover a multitude of risks.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;It&amp;rsquo;s inevitable &amp;ndash; regardless of whether you&amp;rsquo;re a defined benefit (DB) or defined contribution (DC) plan sponsor, a non-profit healthcare system, or an endowment or foundation. At some point in time, the top brass that manage your organisation&amp;rsquo;s investments will no longer be with the organisation, whether that&amp;rsquo;s through retirement, a job change, or a change in personal circumstances.&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp; &lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Then what? Who&amp;rsquo;s in charge of protecting your employees&amp;rsquo; retirement savings or the growth of your organisation&amp;rsquo;s investments? Do they have the requisite investment knowledge to do so while simultaneously acting in a fiduciary capacity?&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;One thing&amp;rsquo;s for certain &amp;ndash; whether it&amp;rsquo;s people&amp;rsquo;s financial security or the financial health of the organisation on the line, you better have a plan in place. This is why, as uncomfortable as the topic can be, we believe it&amp;rsquo;s vital for all organisations that haven&amp;rsquo;t already done so to fully address the issue of investment succession planning as soon as possible. For organizations that have already taken this step, we encourage you to read this article and then consider if it makes sense to re-evaluate any parts of your plan. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Below, we&amp;rsquo;ll share why we think most institutional investors should at least consider investment outsourcing as part of their succession plan. Let&amp;rsquo;s get started.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;The importance of maintaining specialised knowledge&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Institutional investing is rife with complexities. It takes a blend of deep expertise, specialised knowledge, and years of hands-on experience in the industry to successfully manage an organisation&amp;rsquo;s investment program. Extensive experience in increasing returns, reducing risks, and managing costs are critical to helping achieve an organisation&amp;rsquo;s investment goals. Take it from me, a former chief investment officer (CIO) at a large energy utility for nearly 20 years.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;It&amp;rsquo;s for these exact reasons that many of my peers are still at the helm of their respective company&amp;rsquo;s investment programs as they approach retirement age. Simply put, the depth of knowledge they&amp;rsquo;ve accumulated from decades on the job isn&amp;rsquo;t something that can be learned quickly or easily transferred. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;But what if that reliance on key man risk doesn&amp;rsquo;t have to be?&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;What if, instead of desperately searching for a replacement to manage your organization&amp;rsquo;s investments when the head of the program announces their departure, you had a trusted outsourced chief investment officer (OCIO) partner &amp;ndash; one with a fundamental focus on OCIO &amp;ndash; already waiting in the wings? A partner that could seamlessly step in and not only preserve the institutional knowledge within your organisation&amp;rsquo;s investment program &amp;ndash; but expand upon it?&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;Why OCIO makes sense as a succession planning alternative&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;We believe there are several advantages to using OCIO as a succession planning alternative, and chief among them is the fact that investment outsourcing is the very bread and butter of a skilled OCIO provider. For these providers, OCIO isn&amp;rsquo;t a line of work they dabble in on the side &amp;ndash; it&amp;rsquo;s core to their very business model. Managing complex investment programs and implementing customized portfolio solutions for global institutional investors is simply what they do, day in and day out. Their business is &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/uk/solutions/institutions/fiduciary-management&quot;&gt;fundamentally OCIO&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;. So when evaluating whether an OCIO firm should be part of your company&amp;rsquo;s investment succession plan, ask yourself: Why not consider partnering with a firm that makes their very living doing this?&lt;/span&gt;&lt;/p&gt; &lt;p&gt;[promobox]&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Another major advantage we see in utilizing an OCIO provider is that doing so &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;drastically reduces the risks of institutional knowledge loss&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;. The reason why is simple: when you hire an OCIO, you&amp;rsquo;re hiring a team, rather than an individual. Doing so mitigates the risk of all of your organisation&amp;rsquo;s investment knowledge disappearing if the inevitable occurs. This is not a sales pitch. It&#39;s just a fact. Asset owner succession planning risk is diminished, because firms with robust capabilities have intentional redundancy, business risk management, and business continuity teams. They manage other related continuity risks as well &amp;ndash; such as cybersecurity &amp;ndash; with robust, vigilant purpose-built efforts.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Look, at my current job, I work side-by-side with about 1,700 people dedicated to improving the financial security of individuals and organisations &amp;ndash; whether through managing a DB or DC plan or the growth of an endowment. If I leave, there are 1,699-ish other people standing by who can provide answers as well as I can. There is simply a much larger pool of expertise. So, not only do I have a drastically larger team of resources, the beneficiaries of my clients&#39; plans do as well.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;A small investment staff can create a big succession risk&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The reality is that the risk of institutional knowledge loss is often much greater at organisations with smaller investment staffs. Non-profits, endowments, and foundations in particular tend to be thinly staffed in these areas. Many companies with DB plans tend to be in a similar boat, as the dwindling popularity of pension plans means organisations are less likely to have ample resources devoted to managing them. And let&amp;rsquo;s face it, if your investment staff consists of three people, the chances that the second-in-command is ready to take over running the investment function at the drop of a hat are logically slim. Building out a meaningful career ladder on a &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;small team working in a non-core function&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; is tough. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;For many of these organisations, there&amp;rsquo;s also the issue of turnover on the investment committee itself. Some committees pick managers, some approve cash flows, some only approve an investment policy statement (IPS) and review staff-delegated items. In all of these cases, the committee members need to have succession planning for themselves. The fiduciary must determine their own succession plan and the plan for each operational node that has delegated responsibility. If that sounds like a headache, well, that&amp;rsquo;s because it is. A skilled OCIO provider can help sort this all out.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;But my organisation&amp;rsquo;s investment team is well-staffed. So why should we consider OCIO as part of our succession strategy?&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Some of you reading this might be thinking,&lt;em&gt; &lt;/em&gt;OK, I can see why OCIO makes sense as a succession-plan option for organisations with small investment teams. But what about for organisations with substantial investment staffs &amp;ndash; like large endowments or certain large corporations that boast state-of-the-art asset management programs, for instance? Surely their succession risk must be lower?&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Not necessarily. On the one hand, it&amp;rsquo;s true that the bigger the investment team, the smaller the risk that the entire team will depart en masse. But on the other hand, it&amp;rsquo;s equally important to see this through the lens of ensuring that your top-notch investment program remains top-notch &lt;em&gt;at all times&lt;/em&gt;. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In this case, I&amp;rsquo;d argue that even if your organisation&amp;rsquo;s investment program is staffed with skilled lieutenants who are more than able to step up to the plate if the leaders leave, you simply cannot have a deep enough bench of investment experts on hand. It&amp;rsquo;s just too risky not to. And maybe that deep bench includes a partnership with an OCIO provider &amp;ndash; a firm that can step in at a moment&amp;rsquo;s notice and &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;serve as an extension of your staff&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; if you hit a rough patch.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;Three additional OCIO benefits for succession planning&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Besides the specialised investment knowledge and ample resources that come with hiring an OCIO provider, we see three other reasons why organisations should explore OCIO as a potential solution:&lt;/span&gt;&lt;/p&gt; &lt;ol start=&quot;1&quot; style=&quot;margin-top: 0in;&quot;&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Economies of scale.&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&amp;nbsp;OCIO can not only help with succession risk, but can also provide an opportunity to piggyback on a drastically higher level of investment scale. Most OCIO firms are almost always able to reduce costs for their OCIO clients. Their economies of scale result from the aggregate power of managing many plans, not just one. The net result? Your organisation may be able to achieve its objectives more reliably, with improved risk management and succession-risk mitigation, all for less money.&lt;br /&gt; &lt;br /&gt; &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;It&#39;s not an&amp;nbsp;&lt;em&gt;all-or-nothing&amp;nbsp;&lt;/em&gt;decision.&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&amp;nbsp;Be sure you understand the&amp;nbsp;&lt;em&gt;shades of gray&lt;/em&gt;&amp;nbsp;between insourcing and outsourcing &amp;ndash; it&#39;s not an all or nothing thing.&amp;nbsp;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7bE3EFFCDF-BF49-4912-BA7E-729384C75F3D%7d%40en-GB&quot;&gt;The best OCIO providers will meet clients where they are&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;. Some clients see the greatest risk in manager contracting, so they may outsource most assignments, but keep actual manager selection decisions in-house. One way you could approach outsourcing would be to look at your greatest, &lt;em&gt;lay-awake-at-night&lt;/em&gt; risks and just outsource those. Regarding succession specifically, a good idea for a firm preparing for a CIO&amp;rsquo;s retirement in the next year may be to just outsource risk management. This way, the firm can test the OCIO waters with this one assignment, and then potentially move further along the outsourcing spectrum.&lt;br /&gt; &lt;br /&gt; &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Outsourcing can create valuable optionality.&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&amp;nbsp;Let&#39;s look at two succession scenarios. In option one, you implement changes by retaining a new internal staff resource &amp;ndash; either through an external recruiting and onboarding process or through promoting a junior member to the senior investment management role. In option two, you outsource to an OCIO provider. &lt;br /&gt; &lt;br /&gt; Now let&#39;s imagine, for whatever reason, you&#39;re unhappy with the results. Ask yourself: In which scenario is it simpler to make a change? In other words, is it easier to replace the new internal resource through firing and restructuring and re-recruiting and restaffing? Or is it easier to request a shift in the individual assigned to your OCIO mandate?&amp;nbsp;&lt;/span&gt;&lt;/li&gt; &lt;/ol&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Change is inevitable at all organisations &amp;ndash; which is why it&amp;rsquo;s critical to have an investment succession plan in place when managing financial assets. But that plan shouldn&amp;rsquo;t have to be hard to execute. Consider reaching out to a skilled OCIO provider so that when the inevitable does strike, the transition is seamless. &lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p&gt;Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.&lt;/p&gt;Peter Corippo<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p> {47FEE895-5B6A-44AF-AA72-13F5F2993A71}https://russellinvestments.com/uk/blog/considerations-surging-markets-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Equity markets hover near all-time highs in U.S., Canada, and Europe</span></li> <li><span>The latest on potential U.S. tariffs</span></li> <li><span>Bank of Canada likely to continue cutting rates</span></li> </ul>Fri, 14 Feb 2025 00:57:29 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;Equity markets are hovering near all-time highs in the U.S., Canada, and Europe&lt;/li&gt; &lt;li&gt;The U.S. announced plans for reciprocal tariffs&lt;/li&gt; &lt;li&gt;The Bank of Canada is likely to continue cutting rates&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Senior Investment Strategist and Head of Canadian Strategy, BeiChen Lin, discussed what investors should consider in light of recent equity-market strength. He also provided an update on the latest U.S. tariff announcements and assessed the outlook for rate cuts in Canada.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;As equity markets soar, what should investors think about?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin began by noting that several major equity benchmarks hovered close to or surpassed their record highs this week, including the S&amp;amp;P 500 Index, the S&amp;amp;P/TSX Composite Index, and the STOXX&amp;reg; Europe 600 Index. This has led some investors to wonder if now could be a good time to chase into the equity-market rally, he remarked.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;From our perspective at Russell Investments, we don&amp;rsquo;t think so. Instead, we believe investors would benefit from &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/europe-canada-us-rates-mwir&quot;&gt;staying disciplined and close to their strategic asset allocations&lt;/a&gt;&lt;/span&gt;&lt;span&gt;,&amp;rdquo; Lin stated. One of the key reasons why is because macroeconomic uncertainty remains elevated, he said. This is the case even in the U.S., where an economic &lt;em&gt;soft landing&lt;/em&gt; looks like the most likely outcome, Lin noted. &amp;ldquo;I believe recession risks in the U.S. are still somewhat above average,&amp;rdquo; he said. U.S. equity valuations also look somewhat stretched, Lin added. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He noted that equity valuations look closer to fair value in places outside the U.S.&amp;mdash;such as Canada and Europe&amp;mdash;but that these cheaper valuations are offset by higher cyclical risks. For instance, if the U.S. administration decides to move ahead with its &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/us-tariffs-potential-implications&quot;&gt;initial plan to tax Canadian imports at a 25% rate&lt;/a&gt;&lt;/span&gt;&lt;span&gt;, the Canadian economy could face an elevated risk of an economic slowdown, Lin observed.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;All told, Lin said that when today&amp;rsquo;s cycle and valuation factors are balanced together, he doesn&amp;rsquo;t see a compelling enough tactical case to overweight equities. Instead, by sticking close to their strategic asset allocations and potentially rebalancing, investors could lock in some of the gains they&amp;rsquo;ve made and still have the opportunity to participate in any potential future equity-market upside, Lin said.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;U.S. trade policy update&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Switching to U.S. trade policy, Lin noted that President Donald Trump held a press conference on Feb. 13 to discuss plans for reciprocal tariffs on key U.S. trading partners.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Of note, the president didn&amp;rsquo;t get into specifics about which countries would face these tariffs, what the tariff rates would be, and when some of the tariffs might go into effect, Lin said. Instead, the Trump administration will study the situation and make some recommendations by April 1, he noted, adding that this doesn&amp;rsquo;t necessarily mean the U.S. will implement new tariffs then. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;At Russell Investments, we think this is an important development, because it gives the U.S. administration a fair amount of flexibility. We believe these reciprocal tariffs might be more of a negotiating tool, but the situation requires careful monitoring,&amp;rdquo; Lin said. He finished by noting that if these or the other tariffs proposed by the administration are implemented, the U.S. would likely see a modest drag on growth and a &lt;/span&gt;modest one-time hit to prices&lt;span&gt;. Meanwhile, some of the country&amp;rsquo;s key trading partners, like Canada and Mexico, could &lt;/span&gt;potentially be impacted to a much greater degree&lt;span&gt;, Lin said&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Growth vs. inflation: What&amp;rsquo;s a higher priority for the Bank of Canada?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin wrapped up with a look at the inflation backdrop in Canada, noting that the January numbers will be published by Statistics Canada on Feb. 18. He said that although the U.S. CPI (consumer price index) surprised to the upside in January, that doesn&amp;rsquo;t mean Canadian inflation data will necessarily come in hot as well. &amp;ldquo;Although the Canadian and American economies are very interconnected, they don&amp;rsquo;t always move in lockstep,&amp;rdquo; Lin remarked.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He said that even if Canada&amp;rsquo;s inflation report for January comes in slightly stronger than anticipated, the Bank of Canada (BoC) might look past it, treating it more like a one-time shock. The reason why is that the bank is likely to be more focused on boosting growth instead of taming inflation, Lin said. &amp;ldquo;Ultimately, &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;https://russellinvestments.com/uk/blog/europe-canada-us-rates-mwir&quot;&gt;given the weakness in the Canadian economy&lt;/a&gt;&lt;/span&gt;&lt;span&gt;, we expect that the BoC will continue cutting rates in 2025,&amp;rdquo; he concluded. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/HZd0k9HGScA&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/16624143&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;BeiChen Lin<p>Issued by Russell Investments Limited. Company No. 02086230. Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone +44 (0)20 7024 6000. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.</p>