Russell Investments’ 2017 Global Market Outlook: Trumponomics & Brexit point to an investing roller coaster in 2017
- U.S. GDP growth expected to top 2%- Two additional U.S. federal funds rate hikes forecast for 2017- U.S. equity markets likely to finish 2017 below current highs
SEATTLE, December 6, 2016 — Russell Investments today released its 2017 Global Market Outlook, offering economic insights and market forecasts from its global team of multi-asset investment strategists for the year ahead.
Russell Investments’ strategists anticipate a challenging investment environment in 2017. Near-term, the team believes global economic growth is likely to improve, spurred by fiscal stimulus as political leaders worldwide move away from austerity. Longer-term, however, they think the prospect of trade protectionism raised by Brexit and the U.S. presidential election could mean slower growth and higher inflation.
“Buckle up for what could be a roller-coaster investing ride in 2017,” said Andrew Pease, global head of investment strategy at Russell Investments. “We will watch closely for evidence that markets have moved too far into fear or euphoria and look for downside protection when it is cheap.”
In the U.S., the strategists see equity market valuations as already expensive, and they caution that euphoric anticipation of Trump stimulus could lead to an extended overbought period. Corporate profit growth is likely to be in the mid-single digits at best, while currently high margins may feel pressure from rising labor costs and a stronger dollar.
“Trumponomics is directionally pro-growth, pro-inflation and our central scenario is a net addition of half a percentage point to real GDP growth,” said Paul Eitelman, multi-asset investment strategist for North America at Russell Investments. “We continue to favor Europe and Japan equities over the U.S. in global portfolios, and expect expensive U.S. valuations to limit future market performance.”
Inflation and a more hawkish U.S. Federal Reserve appear in the strategists’ outlook as headwinds for bonds, but uncertainty is the primary reason the team has upgraded the 10-year U.S. Treasury yield forecast. Trumponomics is untested and they believe too much stimulus could overheat the U.S. economy, resulting in more Fed tightening and an economic downturn in 2018.
“The search for yield is not going to get any easier against a backdrop of record U.S. equity prices, narrow credit spreads and low bond yields," said Jeff Hussey, Russell Investments’ global chief investment officer. "Investors will need to venture further afield in search of returns, using the full range of tools available in a globally diversified, multi-asset portfolio.”
For more information on the annual report, which also includes the strategists’ latest views on Europe, Asia-Pacific and currencies, please see the 2017 Global Market Outlook.
About Russell Investments
Russell Investments, a global asset manager, is one of only a few firms that offers actively managed multi-asset portfolios and services which include advice, investments and implementation. Russell Investments stands with institutional investors, financial advisors and individuals working with their advisors—using the firm’s core capabilities that extend across capital market insights, manager research, asset allocation, portfolio implementation and factor exposures—to help each achieve their desired investment outcomes.
Russell Investments has more than $257 billion in assets under management (as of 9/30/2016) and works with more than 2,500 institutional clients, independent distribution partners and individual investors globally. As a consultant to some of the largest pools of capital in the world, Russell Investments has $2.2 trillion in assets under advisement (as of 12/31/2015). The firm has four decades of experience researching and selecting investment managers and meets annually with more than 2,200 managers around the world. Russell Investments also traded more than $2 trillion in 2015 through its implementation services business.
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